Housing price momentum to continue

Housing price momentum to continueThe latest research from BIS Shrapnel shows the momentum in price growth that emerged in 2013-14 is expected to continue to support prices in 2014-15 and, to a lesser extent, in 2015-16.BIS Shrapnel’s Residential Property Prospects 2014-2017 report indicates that tight markets and low interest rates have assisted the Sydney, Melbourne, Perth and Darwin markets in the past year, and contributed to an upturn in Brisbane. In Canberra, Adelaide and Hobart, low interest rates have contributed to strong purchaser activity, if not stronger price growth.The report indicates that continuing low interest rates will keep housing in most of the capital cities at an affordable level and this will help to maintain price growth for the time being.However, it also strikes a note of caution by predicting that the potential for oversupply in many markets, together with an eventual tightening in interest rate policy, will impact on prices and potentially bring about a downturn by 2016-17.According go the report, Brisbane is expected to exhibit the strongest price growth of the capital cities over the next three years, with the report forecasting median house price gains over the next three years (to June 2017) of 17 per cent. Brisbane has shown weak price performance in recent years and this has led to improvements in affordability. This, in combination with reduced dwelling construction, means there is a sizeable dwelling deficiency in place.Sydney is also expecting price growth as it’s also estimated to still be in deficiency. However, as an increasing number of new dwellings become available in the Sydney market, demand pressures will ease, leading to a forecast price decline by 2016-17.All the other capital cities are expected to experience weaker growth. The Perth and Darwin markets are forecast to weaken gradually and the report suggests prices in both markets might even fall as resources sector investment continues to wane. Surplus supply in Adelaide, Canberra and Hobart is forecast to mitigate price growth in those markets, together with relatively limited local economic outlooks.The BIS Shrapnel report is available for purchase here: http://www.bis.com.au/reports/res_prop_prospects_r.html