Record low interest rates are pushing prices of housing higher in Australia. But how long can the current run of growth, confined mostly to Sydney and Melbourne, continue?
Economic forecasters BIS Shrapnel see a significant change over the next three years. And the growth won’t be in Australia’s two biggest cities as it is now.
BIS Shrapnel says the spectre of tightening interest rates, a glut of apartments and deterioration of affordability will create conditions for price falls in a number of cities from 2017.
This chart forecasts where the prices will rise, and fall, for the next three years:
BIS Shrapnel, in its report Residential Property Prospects, says doomsday predictions for the residential market are likely to be overblown.
However, report author Angie Zigomanis says most capital cities are building apartments at record rates, driven by investor demand.
“As these projects are progressively completed, strong tenant demand will be required to support rents and consequently values upon completion,” she says.
However, population growth is slowing and this will impact most on rents.
The strongest price growth over the next three years is forecast for the Brisbane market where affordability is improving after a weak price performance and low housing construction.
The momentum in the Sydney market is expected to continue but demand will ease as new construction works its way to completion.
House prices in the Melbourne market will show a moderate rise in 2015-16 but begin to decline over 2016-17 as more apartments come on to the market.
The Perth and Darwin markets are forecast to progressively slide as resource sector investment continues to fall.
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