The comments come as new Australian Property Monitors figures show Australian housing growth slowed to 2.4% during the June quarter, with annual house price growth at a higher-than-expected 15%.
APM economist Matthew Bell says while that growth rate definitely shows evidence of a slowdown, the property market is performing better than expected and prices are expected to grow by up to 10% by the end of the year.
He says the 6% growth for the first six months of the year indicates the entire 2010 growth should be “much stronger” than previously expected.
“I was quite comfortable in the first quarter, grew more uncomfortable in the second quarter with some of the results, but now I think we’re going to see about 8-10% growth and I’m very happy with that. It’s certainly surprising, and not at all a bad result.”
“I think everyone now is talking about capacity constraints, with demand and so on, which will continue pushing up prices. And look at unemployment, which is doing very well, especially in Canberra.”
The APM data shows Melbourne is still the country’s hottest property market, with annual growth of 27% to a median of $578,447, representing growth of 4.4% for the quarter. However, that quarterly growth is the lowest since March 2009.
Sydney grew by 2.3% over the quarter, and 13% over the year, to reach $625,488, while Canberra recorded 1.9% growth for the quarter, and 16.5% for the year, to $568,520.
Prices actually dropped during the quarter in Hobart and Darwin by 1.9% and 0.7% respectively, to $308,434 and $581.290.
The growth in this quarter was largely due to activity in the more affordable suburbs, Bell says. With price growth moderating, sellers have been struggling to obtain their target prices and bargain-hunters have been out in force, with the lower-end of the market outperforming the top for the first time in 12 months.
“In this most recent quarter, we’ve seen a return to the less expensive end of the market outperforming the top end in all major housing markets with the exception of Brisbane.”
“But I think the performance here is strong than anyone would really expect. Of course the market is definitely slowing, and we’re seeing low auction clearance rates, but 2.4% is higher than the long-term trend and in cities like Sydney and Melbourne, growth is still very strong.”
Part of the reason for this growth is demand from investors. Bell points to ABS data which shows that as owner-occupied demand for loans hit a nine-year low in April, investor loans grew 17.6% in the previous 12 months.
“So we have that investor demand, and we also have to consider this is a Winter report, and with Spring coming up I think we can expect some strong results. I certainly do think Melbourne has a bit to cool, and maybe Sydney as well, but I don’t think we’re going to get anywhere close to falling prices.”
Bell also says higher interest rates for the rest of the year are unlikely, given the official inflation data released yesterday.
“I think the interest rate risk has largely disappeared, given yesterday’s announcement. Westpac have come out and said they don’t expect any rises this year, and Macquarie have said the same. I would think that interest rate rises have largely disappeared for the rest of the year.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
