Perth, Sydney to lead price lift
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Mr Mellor stressed that the home buyers and investors should not expect that sort of growth over the longer term. In his view, interest rates will be rising again by 2014 and snuff out the upturn. Over the longer term, certainly for this decade, owners should expect average house price growth of around 5 per cent a year, said Mr Mellor.
Neverless even that modest outlook is very different to that predicated by some in the United States. The international Monetary Fund, in its October Country Report on Australia, estimated that house prices were 10-15 per cent over-valued on simple price-to-income and price-to-rent metrics.
BIS Shrapnel acknowledged that purchaser sentiment had been plagued by fears of a further downside to housing prices, similar to the collapse in the US. Mr Mellor rejected that comparison, largely because of Australia’s housing shortage.
On his numbers the average deficiency in 2011-12 to 2013-14 will be 180,000 homes, compared with average starts of 156,000. “The underlying dwelling deficiency will be the key to preventing substantial declines as seen in the US.” he said.
The deficiency varies from state to state, from massive in NSW, to fewer starts than needed in Queensland and Western Australia, to a weak deficiency in Victoria, and to oversupply in South Australia and the ACT.
The other key element in the BIS Shrapnel outlook is the return of the first-home buyer. First-home buying soared in 2009 with the first-home buyers grant boost and low interest rates, and then collapsed in 2010 as both stimulants were withdrawn. Mr Mellor said the number of loans to first-home buyers of loans to first-home buyers had been slowly stabilising in 2011.
In June quarter, first-home buying jumped in Queensland, the ACT and particularly, up to 20 per cent, in Western Australia. The experience with the additional first-home owners grant last decade, also points to further first home buying to come. “As growth in loans to first-home buyers returns, some improvements in non-first home buyer activity should also emerge,” said Mr Mellor. Investor demand is likely to remain weak until prices stabilise, over 2011-12 as the first-home owner demand kicks in. BIS Shrapnel has produced the LMI Housing Outlook for 10 years and this report comes with an assessment of the accuracy of the predictions.
March 14, 2014
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