Uneven housing market recovery to slow down from 5% rise in 2013 to 3.5% in 2014 with Perth and Sydney strongest: Westpac's Matthew Hassan

Property prices are forecast to rise 5% nationally in 2013 moderating to 3.5% in 2014, according to Westpac senior economist Matthew Hassan.

He says the current recovery in Australia's housing markets has been "slow to form and despite a quickening in early 2013 remains uneven across segments and states".

"We expect more of the of the same going forward.

"Price expectations suggest current positive momentum is well-entrenched but ‘consumer caution’ and a reluctance on the part of buyers to stretch themselves financially will remain a major ongoing restraint.

"Concerns around job security remain high and although lower interest are easing pressures on existing borrowers and improving affordability for those looking to enter the market, the mining investment downturn and associated labour market weakness will continue to inhibit buyers," says Hassan.

He expects wide divergence in property market performance across capital cities "with a variety of state-specific forces at work". 

"Sydney and Perth are expected to lead the way initially but with activity likely to wane in the west as the mining downturn gathers momentum.

"'Supply' factors are expected to be become more of a drag in Melbourne, but are expected to diminish in Brisbane where rental markets have already tightened up rapidly.

"Dwelling construction will also be uneven with solid but unspectacular growth forecast nationally – an 8.9% over the two years to the end of 2014," he says.

"Sydney and Perth will continue to lead the way although the mining slowdown and a stretched starting point for affordability are expected to become more of a constraint in the west," he says.

"Despite the solid start to 2013, the Melbourne market will tend to under-perform, particularly as a large pipeline of dwellings currently under construction comes onto the market (including 20,000 units approved for inner Melbourne over the last 2yrs).

"Brisbane, which has been the weakest market over the last 3yrs, is expected to remain soft near term but improve a little in 2014.

He expects lower interest rates to take the pressure off Queensland's weakest sub-markets - the Gold Coast and Brisbane’s southern fringes.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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