Australian house prices to rise by up to 20 per cent

By staff writers
NEWS.com.au

June 15, 2009 12:01am

AUSTRALIAN house prices will rise by nearly 20 per cent over the next three years, buoyed by the "current heat" in the market surrounding first home buyers.

That’s the forecast from research house BIS Shrapnel’s Residential Property Prospects report - based on data from the Real Estate Institute - released today.

BIS Shrapnel’s Angie Zigomanis said activity in the lower end of the market - buoyed by the boost to the first home owners grant and low interest rates - were generating “green shoots” of recovery.

The report says average house prices in most capital cities will grow by between 11 and 19 per cent over the next three years. In real terms (where prices are adjusted for inflation) the level of percentage growth is about half.

Mr Zigomanis, who said actual prices were more indicative than prices adjusted for inflation, predicts the boost to the first home owners grant combined with low interest rates would kick start further activity in the “upgrading” market.

Malcolm of Ankh Morpork “If the first home buyers are in the market buying, someone is selling it to them,” he said.

“We’re expecting that increased first home buyers activity to lead through to stronger upgrading demand for people upgrading to their next property,” he said.

Mr Zigomanis said once the (boost to the) first home owners grant expires, and first home buyers drop back out of the market, there’s enough activity in the market so it becomes self-sustaining.

The boost to the first home owners grant will finish at the end of this year.

Unemployment curbing property growth

But the research, based on Real Estate Institute data, said house prices would remain relatively stagnant until unemployment peaked around June 2010.

“Everything’s pointed at people jumping in the market”.

“At the moment we’re dealing with a confidence issue,” he said.

Weak economic growth and rising unemployment meant Australians were hesitant to jump into the market, he said.

The Government forecast in its May Budget that unemployment will rise to 8.5 per cent by mid-2011, leaving one million Australians out of work.

BIS Shrapnel predicts unemployment to peak “somewhere between 7 and 8 per cent” mid next year.

Mr Zigomanis said unemployment would impact house prices “more so from a confidence perspective”.

“Those people who have the means to buy property, and still have a job to buy property, they may be concerned about their employment outlook,” he said.

Outlook via region, according to BIS Shrapnel

Sydney

- Median house price $530,000 in June 2009

- New home construction at 50-year lows

- Total price growth forecast at 19 per cent to 2012

- Strongest growth at end of three year period

Melbourne

- Median house price $425,000 in June 2009-06-12

- A fall of 6 per cent for the financial year

- Pick up in “upgrader” activity expected

- Nearly 20 per cent increase in prices to 2012

Brisbane

- Median house price $391,000 in June 2009

- Down 7 per cent for financial year

- Interstate migration to boost modest price growth

- House prices to rise by 16 per cent to 2012

Gold Coast and Sunshine Coast

- House prices generally move in tandem with Brisbane

- Expected to grow by 14 per cent to 2011

- Price growth to lag slightly behind Brisbane

Adelaide

- Experienced double-digit growth to 2007

- Now down 3 per cent to $360,000 in June 2009

- Lowest median house price of mainland state capitals

- Incentives “having the greatest financial impact”

- Tipped to jump 19 per cent to 2012

Perth

- Market began slowing in 2007, ahead of eastern states

- Median house price tripled in five years to 2006

- Affordability improving; price decline stabilising

- Median house price $425,000 in June 2009

- House prices to increase by 12 per cent to 2012

Hobart

- Median house price declined marginally in 2008

- Increased interstate migration attributed to “tree-change” mentality

- Average house price $335,000 in June 2009

- To jump 15 per cent in the next three years to 2012.

Darwin

- Only capital city to record a rise in median house prices in 2008

- Average house price $470,000 in June 2009

- NT reliant on oil, gas; hasn’t weakened as much as other economies

- Gap in investments to kill short-term price growth

- To grow by 11 per cent in three years to 2012

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