Perth to lead house price growth over next three years, with Sydney and Brisbane also strong: BIS Shrapnel and QBE
Perth house prices are expected to grow by a cumulative 20.4% over the next three years to 2015, according to the latest QBE LMI Housing Outlook report prepared by BIS Shrapnel.
The report anticipates the median Perth house price to rise from $505,000 to $580,000 over the next three years, with strong growth also expected for Brisbane (from $450,000 to $515,000) and Sydney ($660,000 to $750,000).
Sydney house price growth is expected to be modest in 2013, at just 2.7%, but is forecast to pick up in 2014 and 2015.
Darwin house prices are also expected to continue to surge rising to a median of $650,000 – making it the second most expensive housing market after Sydney.
Melbourne house prices will continue to tread water over the next three years, rising by less than 2% annually to 2015, with median house price increasing from $540,000 to $557,000, according to the report.
Modest house price growth is also anticipated for Adelaide, Canberra and Hobart.
Median house price growth forecasts 2013 – 2015 (major capitals)
| Perth | Brisbane | Sydney | Adelaide | |
2013 | 6.3% | 3.9% | 2.7% | 1.3% | 0.9% |
2014 | 7.9% | 7.8% | 6.1% | 2.5% | 1.5% |
2015 | 6.2% | 6.2% | 7.1% | 2.4% | 1.6% |
2015 Median | $580,000 | $515,000 | $750,000 | $580,000 | $557,000 |
Median house price growth forecasts 2013 – 2015 (minor capitals)
| Darwin | Canberra | Hobart |
2013 | 5.3% | -0.8% | -1.1% |
2014 | 5% | 0% | 1.1% |
2015 | 3.2% | 1.4% | 1.4% |
2015 Median | $650,000 | $498,000 | $375,000 |
Source: BIS Shrapnel
The report says the residential market in Perth has stagnated after prices peaked in December 2007, with the median house price reaching $478,000 as a result of deteriorating housing affordability.
“Conditions in Perth are now beginning to turn around and point to a recovery.
“The combination of rising underlying demand and falling completions has seen a substantial deficiency emerge.
“This is being reflected in vacancy rates falling to 1.9% in June 2012, which is well below the balanced market rate of 3%, and underpinning stronger rental growth."
The report also notes that employment growth has also been strong, with the unemployment rate well below 5% while affordability has also improved significantly.”
In addition, “rising investment in new mining and resource projects will lead to further improvement in sentiment”.
The relatively strong outlook for Sydney is based on rental growth continuing to remain solid, “outpacing recent price growth, and driving an improvement in yields”.
“First-home buyer demand — albeit inconsistent due to changes in state government first home buyer incentives — appears to be improving, while the extended period of weak prices together with interest rate reductions over 2011-12 mean that affordability is now at its best level since 2001.
“Given this, the main factor holding back the Sydney market now appears to be confidence. With economic growth forecast to become more broad based outside the resource sector in 2012-13, this should help sentiment,” says the report.
However, in Melbourne “high level of new dwelling construction has coincided with slowing population growth and the market is estimated to have moved from close to balance at June 2011, to a rising underlying surplus of dwellings at June 2012”.
As a result rental vacancy rates have also begun to increase and are expected to continue to rise as most of the investor-purchased apartments work their way through to completion.
The report says there is little in the Melbourne market at the moment to drive demand or price growth, but major price declines are not expected.
Looking at the housing market as a whole, Jenny Boddington, chief executive of QBE LMI, says the affordability of housing is “currently at its best level across most capital cities since the first half of last decade, with the exception of a brief period in 2009 when affordability spiked due to aggressive cuts in interest rates”.
“Notably, affordability is expected to further improve as standard variable interest rates are tipped to fall by another 25 basis points in 2012-13.
“Consequently, we should see increased housing turnover in the market as first home buyer numbers pick up and have a positive effect on upgrader activity, which in turn is predicted to further spur investors return to the market.”
The report also says first-home buyer demand is now trending upwards following depressed activity since 2008-09.