Sydney and Perth set for property price growth of between 4% and 6% in 2013, with increased housing affordability: Macquarie Capital

Better affordability in Sydney and Perth should result in property price growth of between 4% and 6% in these key capital city markets, says Rod Cornish, real estate strategist at Macquarie Capital.

But Cornish says Melbourne, where property is relatively less affordable, is likely to record lower housing price growth.

According to Cornish, if the RBA cuts the cash rate twice more this year Sydney's housing affordability will fall to levels last seen in 2001, with a similar scenario for Perth.

“Normally when you see affordability gets to these levels you see a double-digit jump in prices, but given people’s lower propensity to spend, I think it will be single-digit growth.

“Instead of 10% to 12% growth there will be 4% to 6% growth in Sydney and Perth,” Cornish said in an interview with Australian Financial Review TV.

But in places like Melbourne, which Cornish says is still going through an over-extended cycle, price growth will be lower.

Cornish pointed out that there had been five rate-cutting cycles since 1990, but that the latest one (which began in November 2011) was by far the slowest, meaning a patchy impact on affordability.

“The RBA cut rates twice in 2011 (25 basis points rate cuts in November and December) but then there was a five-month gap [until the May 2012 50-basis-point rate cut].

“In that time the banks raised their mortgage rates, we have never seen that big gap before – this has an impact on affordability."

As a result he said affordability remained “patchy” across different property markets.