Investors are being told now is the time to enter the housing market, as prices are set to rise up to 20% by 2012 with Sydney, Melbourne and Brisbane properties expected to record the most growth, a new report has revealed.
But property experts say the numbers are either relatively low, or overly optimistic, and warn there are still major supply issues affecting the market.
According to the latest figures from QBE Lenders Mortgage Insurance, Australian properties will grow by about 3% next year, followed by about 8% during 2011-12, adding up to an extra $100,000 in value in some instances.
QBE chief executive Ian Graham said for a $500,000 house, the growth will add $15,000 in value this year, $41,000 next year and $44,000 during 2012. The growth has quashed fears the reduction of the first home owner’s grant would slow the property market.
“Although first home buyer demand will ease after the First Home Buyers Grant expires at the end of 2009, upgrades and investor demand is expected to gather momentum and take over as the main drivers of the housing cycle,” Graham said.
The highest growth rate can be found in Adelaide, where prices will increase by 21% by 2012, higher than any other capital city.
Prices in Sydney will grow by 2% in 2010, 7.2% and a massive 10.9% during 2012. In Melbourne, properties are expected to grow in value by 3% next year, 7.5% the following year and 7.8% in 2012.
Darwin properties will grow by 17% by 2012, with Brisbane and Hobart expected to record growth of 15% each. Perth and Canberra investors will see their properties grow in value by 12%.
“Despite a 0.25% rate rise in the first week of October, housing interest rates are expected to remain at a stimulatory level for some time, with the low interest rate environment remaining supportive of the first-home buyer,” Graham said.
“A broad-based recovery is forecast from the second half of 2010 as conditions in the labour market stabilise and investors and buyers are attracted back into the market by low interest rates and high rental yields.”
But despite the encouraging figures, the growth remains lower than the massive 24% rate in Sydney during 2002, and the 36% growth rate in Perth in 2006. Australian Property Monitors senior economist Matthew Bell says the growth of the market remains relatively low.
“Those numbers don’t seem excessively high to me. While we have house prices growing, with figures to come at the end of the month, I think returning back to the +5% growth rates isn’t a big leap given the supply and demand issues that we have.”
“The longer we go with the numbers we have, I don’t think anyone thinks the supply is meeting demand, and I’m hoping that changes so it puts less pressure on the prices… although everyone would love to have a high gain in value.”
David Airey, president of the Real Estate Institute of Australia, says he is astonished at the report’s prediction of 11% growth in Perth by 2012, and that he is hesitant about taking the figures on board.
“These figures are highly optimistic. We are confident the property market is showing all the signs of a steady recovery towards normal growth, particularly in Sydney, but I’m reluctant to substantiate other people’s figures.”
“We rely on figures produced by real estate agents, and we look closely at those each quarter, you can’t accurately predict beyond the current financial year, and certainly not beyond 2012. I’d be very cautious about putting highly optimistic figures out there… and certainly not double digits.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
