This article is from the Australian Property Journal archive
Residential markets across Australia are currently suffering through the worst affordability crisis since the 1980s boom, according to industry analyst and forecaster, BIS Shrapnel – and things aren’t likely to get better in the foreseeable future.
Despite this dire predicament, the leading forecaster believes the housing market is still benefiting from an improvement in owner-occupier lending activity, a rebound in first home buyer interest, low unemployment, solid wages growth and high net overseas migration — all of which are preventing a more significant slide in house prices.
BIS Shrapnel warns in its Residential Property Prospects, 2006 to 2009 publication that home owners should expect a further slowing in residential property price growth over the next three years with the exceptions being Brisbane, regional Queensland and regional New South Wales centres, which will show modest growth.
BIS director Robert Mellor adds that Sydney is currently the most expensive Australian capital and will significantly lag the national recovery, placing buyers in a very strong position to bargain.
“The Sydney market will experience another few years of price decreases before it begins to recover in 2008/09, but at the other end of the spectrum,” Mellor said.
BIS Shrapnel anticipates Brisbane will record 4% per annum growth in house values between 2006/07 and 2008/09, due to a shortage in housing supply.
“Regional centres have been attracting increasing numbers of home buyers due to a lower median house price compared to capital city markets. This solid demand will now support modest price growth,” adds Mellor.
Perth and Darwin were the only capital cities to experience strong price rises in calendar 2005.
“The median house price in Perth has streaked ahead of all other capitals in recent years, riding on the wave of the resources boom. However, expects Perth to fall in with the pack this coming financial year as house prices are now on par with Melbourne and Brisbane and growth cannot be sustained,” Mellor reports.
BIS Shrapnel expects the 0.25 percentage point interest rate rise which came through in May to only affect purchasers on the fringe of the market; even home owners who are highly geared should not be strained enough to cause a significant level of forced sales.
“With inflation currently at the top end of the Reserve Bank’s target, BIS Shrapnel believes the RBA will be forced to raise rates again in 2006/07, but leave them static over 2007/08. However, while we are forecasting a rise in interest rates over 2006/07, we expect wages growth to more than offset this increase,” Mellor said.
BIS Shrapnel expects a slight decline in interest rates and an economic rebound to prompt a recovery in prices across the board over 2008/09.
“With vacancy rates set to tighten further to below 2% over 2006/07 in a number of capital cities, rental growth is set to accelerate over the next three years. Rental growth of 10% per annum could easily occur in Sydney, while Melbourne and Brisbane could also experience growth of between 6 to 8% per annum,” he concluded.
By Ted McDonnell
