This is the latest Press release from BIS Shrapnel
Residential Property Prospects, 2003-2006
A PAUSE IN THE SPIRAL - AND THEN RESIDENTIAL PROPERTY PRICES WILL SURGE AGAIN
The first signs are emerging of caution in residential property markets, with declining purchases by first home buyers, concerns over the global economy which are creating consumer uncertainties, and increasing residential vacancy rates, says BIS Shrapnel.
But the firm's latest study, Residential Property Prospects, 2003-2006, forecasts only a slowing, not a halt, to the price spirals of recent years, with prices expected to increase by between 9 per cent and 36 per cent over the next three years, around the various Australian capital cities.
The study forecasts a further widening in the gap between Sydney and Melbourne residential prices, from the current disparity of $115,000 to $196,000 in 2006.
The median house price in Sydney is forecast to reach a brief peak of $578,000 in 2006, before declining by up to 10 per cent the following year. The median house price in Hobart in 2006 - the least expensive of the state capitals - is expected to be $170,000 (see figures at the foot of this release).
The percentage increase figures are not adjusted for inflation, which is expected to increase prices by around 10 per cent over the same period. In real terms, prices are expected to decline marginally in Melbourne and Adelaide.
The joint authors, Director of Building Services Robert Mellor and Angie Zigomanis, Senior Property Analyst, observes that the recent strong price growth has been driven by the increase in net overseas migration, which has substantially strengthened underlying demand in a low interest rate environment.
The market is expected to pause in 2003/04. First home buyer demand has substantially weakened. The presence of investors - who accounted for 37 per cent of total residential borrowings in the year to March 2003 - will wane as vacancy rates rise.
However, underlying demand remains strong and will maintain modest price increases.
The dwelling stock deficiencies in Queensland and NSW will rise substantially over the next three years, driving strong price growth in Brisbane and Sydney.
The state capitals
Sydney: House prices have increased by more than 40 per cent over the 18 months to December 2002, driven by high first home buyer activity and increasing underlying demand. Price increases are expected to have moderated in the six months to June 2003, with the median house price rising to $465,000, representing an annual increase of 20 per cent. However, rents are showing little improvement in the face of strong capital gains, and investment returns are declining. Investor demand will soften over 2003/04, along with owner-occupier demand, in the light of an uncertain economy. However, as the economy strengthens in 2004 and 2005, an increasing stock deficiency will create strong price growth, driven in particular by land supply shortages.
Melbourne: The median house price has increased by 114 per cent between 1996 and 2002, an average of 13.5 per cent annually. Growth is forecast to have slowed to 7 per cent in 2002/03 to a median price of $350,000 and the stock deficiency has fallen from a peak of 18,600 dwellings in Victoria in 1998 to an estimated 6,700. Construction is still high, and weakening demand due to an expected return to a net interstate migration outflow from Victoria, will result in a further reduction in stock deficiency, slowing growth in residential values to 2 per cent over 2003/04, before improving slightly in the following two years.
Brisbane: Residential prices improved by only 3 per cent in real terms between 1993 and 2001 because of a persistent oversupply. Prices have subsequently increased substantially and are forecast to have risen by 21 per cent in 2002/03. The stock surplus has been reversed, and Queensland now has a deficiency of nearly 17,000 dwellings. Underlying demand has increased due to a stronger inflow from both overseas migration and net interstate migration. Strong price growth is forecast over the next three years.
Adelaide: Price growth has been particularly strong over the past four years at 63 per cent, but new home construction has exceeded underlying demand and exacerbated an oversupply of dwellings. This oversupply and weak underlying demand will limit price growth.
Perth: The median house price increased by 30 per cent over the five years to June 2001, and increased by 12 per cent in 2001/02. Growth of 10 per cent is forecast for 2002/03, with the median rising to $205,000. With recent net interstate migration expected to reverse from outflow to inflow, moderate price increases are forecast for the next three years.
Hobart: Despite weak population growth and modest underlying demand, Hobart benefited significantly from the First Home Owner's Grant. The median price rose by 8 per cent in 2001/02 and is forecast to have increased by a further 19 per cent in 2002/03. However a significant oversupply has developed and price increases will be much more modest over the next three years.
Canberra: The market was weak from 1992 to 1999, but has rebounded strongly with median house price growth of 44 per cent over the three years to June 2002. The median price is forecast to have risen by a further 19 per cent in 2002/03 to $270,000. The market is now broadly in balance, and prices are expected to rise by 13 per cent over the next three years, or 3 per cent in real terms.
Darwin: Prices have been weak with net interstate migration outflow hampering growth. This outflow is expected to decline to zero over the next three years, driving up demand and resulting in moderate price growth.
Median house price, Australian capital cities
* Not adjusted for inflation
(e) (estimate), f (forecast)
Source: Historical, ABS; forecasts: Residential Property prospects 2003-2006, a BIS Shrapnel study.
By the year 2006,.....will cost per cent
a house in............of a house in Sydney
Melbourne.....................66
Canberra......................53
Brisbane......................52
Darwin........................44
Perth.........................43
Adelaide......................38
Hobart........................29
Source: Residential Property prospects 2003-2006, a BIS Shrapnel study.
Edited by Les to utilise "php" - thus allowing a better display...
Residential Property Prospects, 2003-2006
A PAUSE IN THE SPIRAL - AND THEN RESIDENTIAL PROPERTY PRICES WILL SURGE AGAIN
The first signs are emerging of caution in residential property markets, with declining purchases by first home buyers, concerns over the global economy which are creating consumer uncertainties, and increasing residential vacancy rates, says BIS Shrapnel.
But the firm's latest study, Residential Property Prospects, 2003-2006, forecasts only a slowing, not a halt, to the price spirals of recent years, with prices expected to increase by between 9 per cent and 36 per cent over the next three years, around the various Australian capital cities.
The study forecasts a further widening in the gap between Sydney and Melbourne residential prices, from the current disparity of $115,000 to $196,000 in 2006.
The median house price in Sydney is forecast to reach a brief peak of $578,000 in 2006, before declining by up to 10 per cent the following year. The median house price in Hobart in 2006 - the least expensive of the state capitals - is expected to be $170,000 (see figures at the foot of this release).
The percentage increase figures are not adjusted for inflation, which is expected to increase prices by around 10 per cent over the same period. In real terms, prices are expected to decline marginally in Melbourne and Adelaide.
The joint authors, Director of Building Services Robert Mellor and Angie Zigomanis, Senior Property Analyst, observes that the recent strong price growth has been driven by the increase in net overseas migration, which has substantially strengthened underlying demand in a low interest rate environment.
The market is expected to pause in 2003/04. First home buyer demand has substantially weakened. The presence of investors - who accounted for 37 per cent of total residential borrowings in the year to March 2003 - will wane as vacancy rates rise.
However, underlying demand remains strong and will maintain modest price increases.
The dwelling stock deficiencies in Queensland and NSW will rise substantially over the next three years, driving strong price growth in Brisbane and Sydney.
The state capitals
Sydney: House prices have increased by more than 40 per cent over the 18 months to December 2002, driven by high first home buyer activity and increasing underlying demand. Price increases are expected to have moderated in the six months to June 2003, with the median house price rising to $465,000, representing an annual increase of 20 per cent. However, rents are showing little improvement in the face of strong capital gains, and investment returns are declining. Investor demand will soften over 2003/04, along with owner-occupier demand, in the light of an uncertain economy. However, as the economy strengthens in 2004 and 2005, an increasing stock deficiency will create strong price growth, driven in particular by land supply shortages.
Melbourne: The median house price has increased by 114 per cent between 1996 and 2002, an average of 13.5 per cent annually. Growth is forecast to have slowed to 7 per cent in 2002/03 to a median price of $350,000 and the stock deficiency has fallen from a peak of 18,600 dwellings in Victoria in 1998 to an estimated 6,700. Construction is still high, and weakening demand due to an expected return to a net interstate migration outflow from Victoria, will result in a further reduction in stock deficiency, slowing growth in residential values to 2 per cent over 2003/04, before improving slightly in the following two years.
Brisbane: Residential prices improved by only 3 per cent in real terms between 1993 and 2001 because of a persistent oversupply. Prices have subsequently increased substantially and are forecast to have risen by 21 per cent in 2002/03. The stock surplus has been reversed, and Queensland now has a deficiency of nearly 17,000 dwellings. Underlying demand has increased due to a stronger inflow from both overseas migration and net interstate migration. Strong price growth is forecast over the next three years.
Adelaide: Price growth has been particularly strong over the past four years at 63 per cent, but new home construction has exceeded underlying demand and exacerbated an oversupply of dwellings. This oversupply and weak underlying demand will limit price growth.
Perth: The median house price increased by 30 per cent over the five years to June 2001, and increased by 12 per cent in 2001/02. Growth of 10 per cent is forecast for 2002/03, with the median rising to $205,000. With recent net interstate migration expected to reverse from outflow to inflow, moderate price increases are forecast for the next three years.
Hobart: Despite weak population growth and modest underlying demand, Hobart benefited significantly from the First Home Owner's Grant. The median price rose by 8 per cent in 2001/02 and is forecast to have increased by a further 19 per cent in 2002/03. However a significant oversupply has developed and price increases will be much more modest over the next three years.
Canberra: The market was weak from 1992 to 1999, but has rebounded strongly with median house price growth of 44 per cent over the three years to June 2002. The median price is forecast to have risen by a further 19 per cent in 2002/03 to $270,000. The market is now broadly in balance, and prices are expected to rise by 13 per cent over the next three years, or 3 per cent in real terms.
Darwin: Prices have been weak with net interstate migration outflow hampering growth. This outflow is expected to decline to zero over the next three years, driving up demand and resulting in moderate price growth.
Median house price, Australian capital cities
PHP:
...............As at June As at June Per cent
quarter quarter increase over
2003e 2006f three years*
$'000 $'000
Sydney 465 578 24
Melbourne 350 382 9
Brisbane 223 303 36
Adelaide 204 222 9
Perth 205 247 20
Hobart 155 170 10
Canberra 270 306 13
Darwin 215 255 19* Not adjusted for inflation
(e) (estimate), f (forecast)
Source: Historical, ABS; forecasts: Residential Property prospects 2003-2006, a BIS Shrapnel study.
By the year 2006,.....will cost per cent
a house in............of a house in Sydney
Melbourne.....................66
Canberra......................53
Brisbane......................52
Darwin........................44
Perth.........................43
Adelaide......................38
Hobart........................29
Source: Residential Property prospects 2003-2006, a BIS Shrapnel study.
Edited by Les to utilise "php" - thus allowing a better display...
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