There are increasing signs that we are moving into the next stage of the property cycle with the increased buyer confidence that has been evident at the lower end of the property market now rippling its way up into properties around the $500,000 mark.

 

The Westpac – Melbourne Institute recently reported that consumer confidence has rebounded in the last month since it was announced that Australia has, so far, escaped recession. This was given a further boost of confidence with a report from economic forecaster BIS Shrapnel, which predicted that house prices could rise by as much as 22% during the next three years.


“The conditions are ripe for a sustained recovery in residential property prices,” according to BIS Shrapnel's Residential Property Prospects 2009 to 2012 report. “Low interest rates, solid growth in rents and housing shortages are evident in most markets. However, the current economic malaise will mean confidence will only recover slowly during 2009/10”

There is currently a surge in first-home buyer demand due to the Federal government's first home owner scheme and low interest rates and study author Angie Zigomanis, senior project manager at BIS Shrapnel, forecasts there will be 180,000 first-home buyers in 2009.

Although first-home buyer demand was expected to ease after the expiry of the government's boost scheme at the end of 2009, home upgraders and property investors are expected to take the baton.

“We expect rising confidence in the prospects for an economic recovery in 2010, so investors are likely to return in greater numbers, attracted by increased rental returns and low interest rates.'' Mr Zigomanis said.

Among the state capitals, Sydney, Melbourne and Adelaide will show the strongest price growth over the next three years, at 19%.

More moderate growth is expected in Brisbane, Hobart, and Canberra, while price growth in Perth and Darwin is expected to be weak as the local economies of these cities are impacted by a decline in investment spending in the resources sector.

BIS Shrapnel estimates Sydney's median house price at June 2009 to be $530,000, and predicts it will rise by mid-2012 to $630,000.

Melbourne's current median house price is estimated at $425,000, rising to $507,000 by June 2012.

In Adelaide, the median price is estimated at $360,000 and predicted to climb to $430,000 over the next 3 years.

In Brisbane, the average house is estimated to cost $391,000 now and is expected to cost $455,000 by mid-2012, an increase of 16%.

Hobart's median house price is estimated to be $335,000 and will rise by 15% to $385,000 over the 3 year period.

An average house in Canberra is estimated to cost $440,000, increasing to $515,000 by 2012, a rise of 17%.

In Perth, the estimated median house price is $425,000, expected to reach $475,000 in three years, up 12%.

Darwin's forecast median house price is $470,000, predicted to show an increase of 11% in the next 3 years.

The median house price in Newcastle is expected to rise by up to 22% over the three years, while Wollongong is forecast to see growth of 20% in the same period. Both of these cities are expected to benefit from the migration of residents from Sydney over the coming years.

While it seems like we are moving on to the next stage of the property cycle, I would like to remind investors that not all properties will increase in value to the same extent and only a small selection of properties make top performing investments.

If you want to find out a bit more about what is happening in your local market and what our research suggests is in store for us, join us at a free property briefing in Melbourne, Sydney or Brisbane. Just click on this link to find out more and reserve your place.

 

Attention HOME BUYERS AND INVESTORS!

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