BIS Oxford Economics has forecast house prices in Brisbane will increase by 20 per cent over the coming three years, but prices in other areas of Australia will rise more slowly.
The Residential Property Prospects 2019 to 2022 report released today found signs of improvement in the outlook for the residential market but said continued lending restrictions and high levels of construction in recent years would keep price growth low.
Brisbane is one exception, with growth expected to be driven by high interstate migration and the affordability of its properties compared with other capitals.
The increase to house prices in the Queensland capital is expected be modest in 2019/2020 but will pick up the following year. It’s a different story for apartment prices, with rises expected to be lower at 14 per cent.
Brisbane’s growth will outstrip other capitals including Adelaide, where house prices are expected to rise by 11 per cent, and Canberra, which is forecast to rise by 10 per cent.
Sydney and Melbourne house prices are also expected to increase but only by 6 per cent in Sydney and 7 per cent in Melbourne between June 2019 and June 2022. Apartment prices will grow much slower, with Sydney values to improve by just 1 per cent over the same time period and Melbourne prices by 4 per cent.
BIS said high levels of investor demand as well as the record levels of construction of new dwellings, particularly apartments, fuelled the previous upturn in prices in Sydney and Melbourne, but continued restrictions on investor lending and low income growth meant the prices reached during the market’s peak could not be sustained.
Even though new property construction in Sydney and Melbourne is now dropping, there won’t be a tip towards a tightening market until the end of 2020/21.
The slow growth means median house prices in Sydney and Melbourne are still expected to be below their respective peaks of June 2017 and December 2017 by June 2022.
Both Perth and Darwin will have to wait — until 2021/22 — for a turnaround. They have both experienced significant declines and will continue to experience challenges due to excess stock, low population growth and weak economic and jobs growth.
In general, BIS believes the high levels of home building in recent years will likely delay a major rebound in property prices.
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“Supply is running at record levels, with new dwelling completions having exceeded 200,000 in each of the past four years and expected to have peaked at a record of just under 227,000 dwellings in 2018/19,” BIS Oxford Economics associate director Angie Zigomanis said.
“This compares with underlying demand for new dwellings averaging around 195,000 per annum in the same period, which in itself is a record.”
The BIS report also noted a slowing economy would also weigh on demand.
“An acceleration in economic growth is not expected until 2020/21 after residential construction bottoms out and both improving building activity and business investment begin to drive economic growth,” the report suggested.
The forecasting agency had tipped a halt to the east coast property boom in a similar report it released in June 2017, predicting at the time Sydney house values would drop 4 per cent over the three years to June 2020.
The researcher’s 2017 analysis also expected a 5 per cent gain in Melbourne house prices, while units in the city were anticipated to drop 4 per cent.
— with AAP