Australian analysts tip modest property price gains in 2013 led by Perth, depending on who you ask

While credit rating agency Fitch is forecasting Australian property prices to go nowhere in 2013 as the market continues to stabilise, Australian commentators and analysts are more expectant of some gain over the next 12 months.

The strongest outlooks are for Perth and Darwin, both beneficiaries of the mining investment boom, while the prospects for Sydney and Brisbane are also sound.

As for the other capital cities, flat markets are in prospect with analysts particularly bearish about Melbourne and Hobart.

Fairfax-owned Australian Property Monitors (APM) is forecasting prices to rise a modest 3% to 5% over the course of the year, but with quite different outlooks for the major capital cities.

APM is most bullish about Perth, tipping property prices to rise by between 5% and 7% over the year, with a similar outlook for the smaller Darwin market.

There are modest property price gains tipped for Sydney, following a decade of near stagnation, with APM expecting rises of between 3% and 5% ,with similar expectations for Brisbane.

At best, Melbourne and Canberra will experience gains of 3%, says APM, while no change is expected in Adelaide and Hobart.

Both BIS Shrapnel and Hotspotting.com.au’s Terry Ryder are bullish about Perth and Darwin, with Ryder expecting double-digit growth in both these cities. Ryder also expects Sydney and Brisbane to perform strongly.

For both BIS Shrapnel and Ryder, Melbourne, Canberra and Hobart are the clear weak spots.

Property price forecasts for 2013

 

APM

BIS Shrapnel

Terry Ryder

Sydney

3% - 5%

2.7%

5% - 10%

Melbourne

0%  - 3%

0.9%

-5%

Perth

5% - 7%

6.4%

10%+

Brisbane

3%  - 5%

3.9%

5% - 10%

Adelaide

0%

1.3%

0% - 5%

Darwin

5% - 7%

5.3%

10%+

Hobart

0%

-1.1%

-5%

Canberra

0 – 3%

-0.8%

0%

APM bases its relatively positive outlook following interest rates being cut to near record lows last year, with chief economist Andrew Wilson expecting prices to build on the modest gains achieved in 2012.

He tips Perth to be the top performer based on record levels of immigration, housing shortages and soaring rents, as well as its exposure to the relative strength of mining sector.

While Ryder is tipping property price growth in excess of 10% for Perth and Darwin, he believes the best opportunities in 2013 will be in regional markets – to find out where, watch the Property Observer webinar: Regions versus capital cities - where to invest in 2013?


BIS Shrapnel as part of of forecasts prepared for QBE LMI's 2012 - 2015 Housing Outlook report says affordability in Perth and Brisbane improved substantially in 2011-12 with a "rapidly rising dwelling deficiency is developing".

"In Darwin, meanwhile, median house price growth of 10.7% was registered in 2011-12 – driven by substantial levels of investment in mining and resource capacity leading to significant income and migration growth.

"Falls in vacancy rates are also expected to continue across all three cities, placing upward pressure on both rents and dwelling prices, attracting demand from investors in particular," says BIS Shrapnel.

News Limited national economics editor Jessica Irvine warns those looking to dip into the property market in 2013 must be aware of spruikers claiming “the next boom in property prices is about to get underway”.

Irvine says while spruikers may talk up mortgage rates being low and that affordability has improved, a “more sober look at the Australian property market reveals prices have hit a wall, although remain historically expensive”.

This is the partly the argument made by Fitch, in its forecast of no movement in Australian house prices in 2013.

Irvine points at that in the boom years from 2003-04 and 2009-10, property prices grew by 50% to 60% in Melbourne, Brisbane and Adelaide and by a “whopping” 10% in Perth.

But now the property boom is “well and truly at an end”.

“Over the past five years, home prices have clocked average annual growth of just 1.9%. You would have been better with your money in the bank,” she says.

Irvine alludes to the fact that the new generation of home buyers need their parents help to acquire their first property while those already on the property ladder are using lower interest rates to pay down debt.

“And so it's hard to see property prices rising much this year, unless something radically new happened to boost people's capacity to borrow,” she says.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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