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SQM Research’s House Price Forecast

As we are heading to the half way mark for the year, many investors are wondering what’s in store for their property investments for the rest of the year.

SQM Research have added their forecasts to the mix and they have a strong conviction that prices are going to fall slightly.

Their forecasts are as follows:

Capital City Outlook

Sydney – Dwelling prices currently down 2% from peak. Expected further decline in 2011 is 2-4%. Therefore, total accumulated decline (from peak) by the end of 2011 is expected to be 4-6%.

Brisbane– Dwelling prices currently down 3.6% from peak. Expected further decline in 2011 is 4-6%. Therefore, total accumulated decline (from peak) by the end of 2011 is expected to be 7.6-9.6%.

Perth – Dwelling prices currently down 3.8% from peak. Expected further decline in 2011 is 4-6%. Therefore, total accumulated decline (from peak) by the end of 2011 is expected to be 7.8-9.8%.

Adelaide– Dwelling prices currently down 1% from peak. Expected further decline in 2011 is 1-3%. Therefore, total accumulated decline (from peak) by the end of 2011 is expected to be 2-4%.

Melbourne– Dwelling prices currently down 2.5% from peak. Expected further decline in 2011 is 3-5%. Therefore, total accumulated decline (from peak) by the end of 2011 is expected to be 5.5-7.5%.

Hobart – Dwelling prices currently down 0.5% from peak. Expected further decline in 2011 is 1-3%. Therefore, total accumulated decline (from peak) by the end of 2011 is expected to be 1.5-3.5%.

Darwin – Dwelling prices currently down 1.3% from peak. Expected further decline in 2011 is 5-7% in 2011. Therefore, total accumulated decline (from peak) by the end of 2011 is expected to be 6.3-8.3%.

Canberra – Dwelling prices currently down 0.4% from peak. Expected further decline in 2011 is 1-3%. Therefore, total accumulated decline (from peak) by the end of 2011 is expected to be 1.4-3.4%.

Regional Outlook

SQM Research believe the following regions are where the falls will be most acute –

Western Australia:

Mandurah – Currently down 8% from peak. Expected further decline for 2011 is 8-12%. Therefore, the total accumulated decline (from peak) by end of 2011 is expected to be 16-20%.

Queensland:

Surfers Paradise – Currently down 9.5% from peak. Expected further decline for 2011 9-15%. Therefore, the total accumulated decline (from peak) by the end of 2011 18.5-24.5%.

Sunshine Coast – Currently down 9.0% from peak. Expected further decline for 2011 is 9-15%. Therefore, the total accumulated decline (from peak) by the end of 2011 is 18-24%.

New South Wales:  

Central Coast – Currently down 3% from peak. Expected further decline for 2011 is 5-8%. Therefore, the total accumulated decline (from peak) by the end of 2011 is 8-11%.

Tweed Heads – Currently down 8.0% from peak. Expected further decline for 2011 is 9-15%. Therefore, the total accumulated decline (from peak) by the end of 2011 is 17-23%.

Sydney’s Prestige property market – Currently down 12% from peak. Expected further decline for 2011 is 5-8%. Therefore, the total accumulated decline (from peak) by the end of 2011 is 17-20%.

Victoria:

Melbourne’s Inner Ring – Currently down 6% from peak. Expected further decline for 2011 is 7-9%. Therefore, the total accumulated decline (from peak) by the end of 2011 is 13-15%.

South Australia:

Port Adelaide – Currently down 3% from peak. Expected further decline for 2011 is 5-8%. Therefore, the total accumulated decline (from peak) by the end of 2011 is 8-11%.

Tasmania:

Launceston – Currently down 3% from peak. Expected further decline for 2011 is 5-7%. Therefore, the total accumulated decline (from peak) by the end of 2011 is 8 – 10%.

So just to be completely clear, when SQM state “peak”, they are referring to the highest point that the median dwelling price reached and in most instances the peak was recorded in the second half of 2010.

When they state “3% from peak”, they mean dwelling prices have fallen 3% from the peak level, up until the present day.

SQM explain that the data on ‘falls’ to date, is sourced from the highly respected, composition adjusted ABS and APM housing price series as well as raw data from Property Data Solutions, which is two of the Reserve Bank’s preferred benchmarks on measuring house prices.

SQM forecasts are based on rigorous modelling (yes, we have highly educated staff here as well and better still, they are experienced!). In essence, the modelling encompasses a regression analysis of historical performance quantified against a number of key variables which have influenced the market in the past.

The range in our forecasts takes into account a possible 25 basis point increase in interest rates with the bottom end of the range (recording the largest fall). Such a rise would need to occur by the beginning of September 2011. The upper end of the range assumes no interest rate rises for 2011.

At the end of their forecast SQM give the following clarification:

For now, we will leave out other, more extreme possibilities in the distribution of our forecasts, which we consider to be an unlikely outcome at this stage, such as either a cut in interest rates or multiple rate rises this year.

However, it is important that we assert that this is just our opinion, though one we have a strong conviction on.

Source: SQM Research



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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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