Property Market to Climb Back Up
After dire predictions of a property bubble bursting and housing prices sinking down, down, down as 2011 progresses the latest news from industry analyst BIS Shrapnel that property prices will pick up later this year is cause for celebration and relief for mortgage owners.
The turn around in the current slowdown will begin towards the middle of the year according to BIS Shrapnel’s forecast. This will set the stage for stronger growth into 2011/12.
BIS Shrapnel’s Building Industry Prospects report shows that the total number of new dwelling approvals is expected to rise eight per cent to 177,000 in 2011/12 – the highest level since 2003/04. In the same period new house approvals are forecast to rise 10 per cent nationally.
Angie Zigomanis, Senior Manager, Building and Construction, BIS Shrapnel blames the Federal Government’s First Home Owner’s Grant Boost Scheme, together with various State Government incentives for new dwellings, for skewing statistics which show that new house approvals rose by 22 per cent in 2009/10.
“These incentives only served to pull forward existing demand, with first-home buyers who would have otherwise been in the market in 2010 entering the market in 2009 to take advantage of the increased incentives before they expired. As a result, there was a drop off in first home buyers in 2010, which has been evident by the decline in new house approvals through the second half of last year,” says Zigomanis.
The number of home loans approved for first home buyers nationally by the middle of 2010 was nearly 60 per cent below the same (albeit elevated) period in 2009. With first home buyer demand well down, up-grader demand for new dwellings also eased as fewer potential buyers were in the market for their existing properties.
Consequently BIS Shrapnel is forecasting new house approvals to record a decline of 11 per cent in 2010/11. However, strong investor demand is driving further growth of 26 per cent in other dwelling approvals (private medium and high density dwellings).
“There is evidence that that the drop off of first home buyers has now bottomed out,” says Zigomanis.
BIS Shrapnel says the improvement in first home buyer activity should continue through 2011 as the post-Boost Scheme decline in first home buyers is played out and numbers slowly recover back to long term levels by the second half of the year. Together with the pent up demand from the deficiency of dwelling stock, and an environment where economic growth is picking up and interest rates are stable over the next six months, demand for new houses will subsequently increase as up-graders also take advantage of the stronger demand for their existing dwellings and trade up to a new house.
Australian Property Monitors (APM) say 2011 will be a year of “stabilisation and modest growth for most capital city housing markets”.
The online property data specialist says fundamentals for the property market remain sound and with a strong economy, rising incomes and ongoing housing shortage to underpin an emerging recovery in the second half of this year. Sydney looks a stand- out to lead the market with growth starting to return by mid- year, particularly in the mid and upper- price market sectors. Although Perth has been subdued recently, the prospects for a gradual recovery through 2011 remain realistic.
Melbourne recorded strong nation- leading house and unit price growth in 2010. With increasing supply of new properties, due to reasonable housing construction activity and record levels of unit construction, the Melbourne market should pause to catch its breath through 2011 and experience subdued price growth.
The Victorian property market has been one of the hottest over the past couple of years. The Real Estate Institute of Victoria (REIV) has just released the 2010 annual median prices, which show that last year was the strongest year for price growth for the Melbourne residential property market since 2001. (The median price of a house in Melbourne increased by $95,000 from $465,000 in 2009 to $560,000 in 2010 – a massive 20.4 per cent increase.)
The APM says prospects for growth in the Brisbane housing market remain problematic as a consequence of the effects of the January floods. Much will depend on the efficiency of the reconstruction now underway.
“Hobart and Adelaide should record modest but steady growth in house prices during 2011. Canberra has the prospect of more substantial growth with significant accommodation shortages and a highly- competitive jobs market. After a quiet 2010 for house price growth by Darwin’s standards, the northern capital should experience buyer activity in 2011 more typical of its volatile price cycle.”