Housing prices to increase by about 20% in Perth and Sydney by 2014: QBE LMI report
Price growth of 20% is forecast for Perth and price growth of 19% is forecast for Sydney by 2014, according to the QBE Lenders’ Mortgage Insurance housing outlook report researched by BIS Shrapnel.
In Perth the forecast reflects the stronger economic conditions driven by accelerated investment in the mining and resource sector, and in Sydney the forecast is a result of the growing deficiency in household dwelling supply.
Overall house prices in Perth are estimated to rise by a cumulative total of 20% over the forecast period – the highest among all capital cities – to $565,000 as at June 2014.
This reflects price growth of around 6% per annum, which is similar to the expectation of household income growth over the three years to 2013-14, and equates to an 8.8% total rise in real terms.
The Sydney median house price is forecast to lift by a total of 19% to $770,000 over the three years to June 2014, a total rise of 8.1% in real terms, according to 2011-14 report released today.
In Sydney, owner-occupier and investor demand is forecast to rise in 2012, underpinned by the rising dwelling deficiency and strengthening economic conditions, leading to higher price growth and dwelling construction.
The report shows that although the median house value rose to $644,700 in June 2011, real house prices in today’s dollar terms remain below their median house price peak of $707,000 in the March 2004 quarter.
The underlying strength of the Australian economy and the continuing shortage of residential housing in Australia, together with stable interest rates, is expected to support Australian housing prices, according to the QBE LMI housing outlook report.
Ian Graham, chief executive of QBE Lenders’ Mortgage Insurance Limited (QBE LMI), says despite the current volatility in the global economy, QBE LMI is cautiously optimistic about the outlook for the Australian housing market.
But Melbourne in the three years to June 2014 is forecast to have the lowest price growth of 6%, due to record levels of new dwelling supply eroding the current dwelling deficiency.
More moderate house price increases between 6% and 8% are expected in Adelaide, Hobart and Canberra.
There is solid price growth of 16% tipped for Brisbane and 17% in Darwin.
First-home buyer demand, which has suffered recently, is forecast to enter a recovery phase through 2012 as the economic outlook becomes more positive and in the anticipation of first-home buyer confidence strengthening as housing becomes more affordable. Investor demand is expected to recover over 2011-12, in line with first-home buyer demand, and support prices at the entry-level end of the market.
The current stability in interest rates is expected to continue well into 2012. There is now a possibility that the Reserve Bank of Australia could cut interest rates in late 2011 to kick-start a recovery in consumer confidence and spending, thereby initiating the next phase of demand, the recovery in the economy and housing market.
Graham notes that Australia is well placed to deal with any uncertainty that our economy or housing market faces in the next few years.
