BIS Shrapnel, one of the forerunning industry analysts and economic forecasters predict that the current demand for property in the most affordable suburbs will aid the recovery of residential property prices during 2009/10.
According to the BIS Shrapnel’s Residential Property Prospects, 2009 to 2012 report, residential property prices should experience a sustained recovery. Low interest rates, solid growth in rents and housing shortages are evident in most markets, but due to the current economic climate, things will recover slowly during 2009/10.
BIS Shrapnel senior project manager and study author, Mr Angie Zigomanis said that the surge in first-home buyer demand, prompted by the Federal Government’s First Home Owner Boost Scheme and low interest rates, have meant that at this stage, most of the action is occurring at the lower priced end of the market.
Although first-home buyer demand is expected to ease after the expiry of the Federal Government Boost Scheme at the end of this year, BIS Shrapnel predicts there will be 180,000 first-home buyers in 2009. Zigomanis explained that a recovery in property demand beyond first-home buyers is already developing, and this is expected to broaden and deepen.
Investors are expected to return after an economic recovery in 2010, attracted by increased rental returns and low interest rates.
BIS Shrapnel expect prices to gradually pick up in 2009/10, but once unemployment has peaked at the start of 2010/11, price growth is forecast to strengthen. A return to double-digit growth in market-wide price measures is projected for 2011/12. Although interest rates are forecast to rise, this is not anticipated to occur until 2011.
Zigomanis said the construction of housing will be the primary driver for Australia’s economic recovery in 2010/11 and 2011/12. A sustained rise in construction of new dwellings needs a growth in property prices. Local business investment and overseas demand is forecast to remain subdued and interest rates are likely to be kept low to support prices until the recovery in the housing sector is in progress.
BIS Shrapnel forecasts Sydney, Melbourne, and Adelaide will show the strongest price growth through to 2012. Housing affordability in Sydney and Melbourne is now at its best level for around a decade, while price levels in Adelaide are below the other mainland capitals.
More moderate growth is expected in Brisbane, Hobart, and Canberra, and in Perth and Darwin, price growth is expected to be weak, as the local economies of these cities are impacted by a decline in investment spending in the resources sector.