The mining towns of Gladstone in Queensland and Karratha in Western Australia have topped a list of suburbs expected to enjoy the biggest capital growth rates in 2011, with inner Melbourne suburbs also expected to do well.
The list was culled from nominations from real estate agents, property developers, asset managers, investors and home owners who take part in NAB’s quarterly residential property survey.
While the full list of hotspots (see below) will give homeowners and investors looking to buy or upgrade plenty of food for thought, the survey shows that the mood of the market is downbeat.
Survey respondents expect house prices to fall 0.5% during 2011 – a sharp downgrade from expectations of 1.5% growth over the year in the survey taken in September 2010.
Queensland, which has been hit by disastrous floods since the survey was compiled in late December, is widely expected to have the worst-performing housing market in the country, with prices in Brisbane tipped to fall 1.7%.
Prices are also tipped to fall in Melbourne (down -0.7%) and Perth (down 0.4%). The survey suggests the outlook is slightly better in Sydney (where prices are expected to increase 0.4%), Canberra (up 0.5%) and Adelaide (tipped to rise 1%).
NAB chief economist Alan Oster says expectations of house price growth fell throughout 2010 and the fresh predictions of falling house prices can be blamed on rising interest rates, which have raised more questions about housing affordability.
“What it’s basically saying is that people are becoming more pessimistic about house price expectations. They are not expecting big falls, but there is no growth either,” he told SmartCompany.
“Over the last few years you’ve had a big reduction in interest rates, you had some changes in taxes and they could gear up. But people are just a little bit more nervous about the issue of affordability.”
“I think we are tracking sideways for a quite awhile.”
Oster also expects sentiment in Queensland to have worsened markedly in Queensland since the floods.
Demand for residential property is tipped to be strongest in inner-city areas, where demand for houses and units is expected to rise over the course of the year.
But falling prices are not expected to tempt investors back into the market. The survey suggests demand for property will be driven by existing owner/occupiers, then residential investors and then first home buyers.
Oster says the outlook for residential property development remains bleak, with access to credit still hampering the efforts of developers. Rising interest rates are also a concern, although survey respondents now expect rates will rise by 50 basis points across 2011, rather than 100 basis points.
Suburbs with fastest expected capital growth in 2011:
Albert Park (VIC)
Melbourne City (VIC)
Ascot (QLD)
Middle Park (VIC)
Bowden (SA)
Newcastle (NSW)
Brisbane City (QLD)
Petersham (NSW)
Brunswick (VIC)
Port Hedland (WA)
Eastwood (NSW)
Port Macquarie (NSW)
Enfield (SA)
Port Melbourne (VIC)
Gladstone (QLD)
Prahran (VIC)
Grovedale (VIC)
Richmond (VIC)
Karratha (WA)
South Hedland (WA)
McKay (QLD)
South Yarra (VIC)
Malvern (VIC)
St Kilda (VIC)
Mandurah (WA)
Sydney City (NSW)
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
