The predicted rise in home prices and shortage of
accommodation is also expected to force up rents /
File.  Source: HWT
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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 in
Sydney, will be the main drivers of this growth.

It forecasts the
Sydney median house will lift by 19 per cent to $ 770,000 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, 16 per cent in
Brisbane, 8 per cent in
Canberra and only 6 per cent inMelbourne.

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,smh.com.au reports.

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.

HOUSING’S STATE OF PLAY

City 2011 median price 2014 forecast per cent change
Sydney $ 644,700 $ 770,000 +19.4 per cent
Melbourne $ 590,000 $ 623,000 +5.6 per cent
Darwin $ 515,000 $ 600,000 +16.5 per cent
Canberra $ 525,000 $ 565,000 +7.6 per cent
Perth $ 470,000 $ 565,000 +20.2 per cent
Brisbane $ 435,000 $ 505,000 +16.1 per cent

Adelaide $ 410,000 $ 440,000 +7.3 per cent
Hobart $ 370,000 $ 395,000 +6.8 per cent

Source: News.com.au

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