Brisbane House Prices set to jump

[Guest The Pom Queen]

HOUSE prices and rents are set to go through the roof again in Brisbane,

 

The report, prepared by BIS Shrapnel, says the underlying strength of the Australian economy, stable interest rates in the short term, high immigration and a dire shortage of houses, will be the main drivers of this growth.

 

It forecasts the Brisbane median house will lift by 16 per cent to $505,000 over the three years to June 2014.

 

The rise in home prices and shortage of accommodation is also expected to force up rents.

 

This compares with 20 per cent in Perth, 19 per cent in Sydney, 8 per cent in Canberra and only 6 per cent in Melbourne.

 

It also predicts that first home buyers will start to re-enter the market in greater numbers next year as the outlook for the economy improves. This will in turn encourage others to return, especially upgraders, as demand for their properties improves.

 

''Sydney hasn't fallen in a hole and house price growth has been minimal but has held up over the last 12 months,'' said Robert Mellor, the managing director of BIS Shrapnel.

 

But he predicts this will jump to about 5 per cent in 2011-12 and 7 per cent the year after, before growth will start to slow as a result of higher interest rates in 2013.

 

''At some point in the next few years rising interest rates will become a concern and that will bring a slowing in residential property markets,'' Mr Mellor said.

 

BIS Shrapnel chief economist Frank Gelber warned the Melbourne market was "running out of steam" as supply levels for new homes increased to satisfy demand.

 

Would-be house buyers would be deterred by a likely 100-basis point increase in interest rates over the next few years. Such a rise would take the official rate to 5.75 per cent.

 

"The property market will stay stronger over the next few years but there will be no huge increase in (residential) property prices over the next five years in Melbourne," Mr Gelber said, speaking in Melbourne.

 

"The next big increase in Melbourne property prices won't be until the next upward phase of the economy."

 

Separately yesterday, a report from the Housing Industry Association revealed that in the past year, Australia's major developers built about 50,500 new houses - down about 20 per cent from the previous year.

 

Commercial to eclipse residential

 

Despite the optimistic outlook for home owners in most capital cities, residential property will be outperformed by commercial property over the next 10 years, according to research by ANZ.

 

Equities will eclipse residential real estate as the strongest performer, but ANZ suggests that when risk is factored in, commercial property will generate similar returns.

 

The report, Asset returns: Past, Present and Future, said owner-occupied housing had made annual average returns of 12 per cent over the 24 years since 1987 even when costs and taxes were factored in.

 

Simple historical comparisons of equities and property are often used by property analysts to demonstrate housing's superior capital returns but ANZ included costs, taxes, interest on loans and factored in the risk associated with investing.

 

It found that owner-occupied housing had the highest returns, outperforming investment property, in part because of capital gains tax exemptions.

 

Investor housing was the next best asset class, performing slightly better than equities over the time analysed, the report said.

 

They were followed by government bonds, term deposits and commercial property.

[flag of convenience]

Depends who you chose to listen to and what interest they have in talking up the market. Generally it is considered that the Australian housing market is 10 to 15% still overpriced.

Probably better to keep your cash in a high interest account and take the 6% on offer.

[robfromdublin]

Yeah I would question their assumptions given the report was prepared for a mortgage insurer.

 

Also, 16% over 3 years is not through the roof. That's about 5.1% p.a. If you assume inflation is running around 3%, then it's a 2.1% real gain. If you can get greater than 5.1% in a bank account then you'll be ahead.

[flag of convenience]

It should be noted that Brisbane house prices have declined 6.1% during the previous year according to the latest figures from RP Data.

Gold Coast prices of course have suffered far bigger falls than that. Over investment was a big part of the reason in a region where not so many jobs can be found.

Expect to see far bigger declines when the mining boom starts to unravel.After QLD hasn't a great deal besides mining and tourism.

A lot of people seem to be under the assumption that the boom will never end. Once the down turn sets in expect to see all the itinerant workers be they engineers or whatever to exist to more profitable parts of the world making the downward spiral more evident.

This will result in prices further falling while other folk deleverage. Take a look at the Irish housing market or for that matter even in the States a few years back people seemed convinced prices wouldn't fall.

Besides taking out a mega mortgage at rather high interest rates the punter should include the 6% loss on not keeping in the bank and awaiting the outcome.

[flag of convenience]

Yeah I would question their assumptions given the report was prepared for a mortgage insurer.

 

Also, 16% over 3 years is not through the roof. That's about 5.1% p.a. If you assume inflation is running around 3%, then it's a 2.1% real gain. If you can get greater than 5.1% in a bank account then you'll be ahead.

Which isn't hard to do at the moment. Also keep in mind prices are falling...