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Brisbane's median house price tipped to leap 17pc by 2015, to about $515k

AFTER years of sluggish price growth, Brisbane's median house price is tipped to jump by 17 per cent in the next three years.

Key points:

  • Return to price growth in 2013/2014
  • 17% growth over next 3 years
  • Affordability at best level since 2003
  • Rent rose by 4% in 9 months
  • Rental vacancies fell from 3.9 to 2.1%
  • Low level of new dwelling is creating emerging shortfall

 

While the green shoots of recovery appear to be emerging in a number of Australia’s residential markets, leading property industry analyst and economic forecaster, BIS Shrapnel, anticipates that the improvement will be uneven across the country.

 

The good news is Brisbane and Queensland are expected to be winners.

 

Brisbane

Brisbane’s estimated median house price of $440,000 in June 2013 represents a two per cent increase for the year – its first annual increase since 2009/10. Brisbane has suffered from weak migration and population growth since 2009 that has impacted negatively on underlying demand and prevented any excess supply being absorbed. Weak state economic conditions have also impacted on sentiment.

 

However, conditions in Brisbane are slowly turning around. With new dwelling construction in Queensland collapsing to below GFC levels, BIS estimates the Queensland residential market now has an emerging deficiency, as indicated by rent vacancies tightening from 3.9 per cent in 2010 to 2.1 per cent in March 2013.

As a result, rents have started to rise. After being flat in 2011/12, the median three bedroom house rent in Brisbane increased by four per cent in the nine months to March 2013.

Affordability has also improved. Brisbane’s estimated median house price at June 2013 remains four per cent below its June 2010 peak, and 11 per cent below in real terms. Together with lower interest rates, affordability is at its best level since 2003.

 

BIS notes that once it appears that the market has definitely bottomed, turnover will begin to increase as purchasers seek enter the market ahead of any further price rises in increasing numbers. As a result, we should start to see a return of price growth in 2013/14, which will accelerate into 2014/15 and remain solid in 2015/16 as more first home buyers and investors start buying.

 

A corresponding increase in new dwelling construction should also contribute to stronger economic conditions, particularly with a sizeable underlying dwelling deficiency expected to still be in place. By the end of 2015/16, rising interest rates will begin to impact on prices, but only after a forecast total rise of 17 per cent in the median house price over the three years to 2016, representing an average rise of 5.2 per cent per annum.

 

Gold Coast and Sunshine Coast

House prices on the Gold Coast and Sunshine Coast have generally moved in tandem with Brisbane, benefiting from the same drivers of population growth as the capital; that is, primarily net interstate migration inflows and, to a lesser extent, overseas migration.

With interstate migration into Queensland now at long term lows, the residential markets on the Gold Coast and Sunshine Coast have weakened considerably. Pockets of these markets are likely to remain in oversupply, which is still being worked through. Affordability relative to the eastern state capitals is not as attractive as it was in the first half of last decade. Given both these centres do not have the same employment drivers as Brisbane to attract overseas migrants, the current affordability disadvantage will result in price growth being slightly lower than for Brisbane over the three years to June 2016, totalling a forecast 15 per cent (4.8 per cent per annum) in both regions.

 

Townsville and Cairns

The median house price in Townsville has held up better than in Cairns since the worst period of the GFC in 2009. While both local economies were impacted by falling resources investment, sharp declines in residential construction and a weak tourism sector, the more diversified economy in Townsville has served to better support prices and construction.

After a prolonged period of underbuilding, dwelling deficiencies appear to be emerging in both of these regions. Local economic conditions are likely to benefit from increased construction, as well as from increased tourism resulting from a lower Australian dollar. This should somewhat offset declining investment in the resource sector over the next three years. Population growth has also been relatively solid considering the weakness in Queensland’s net interstate migration in recent years. These factors should drive some pick up in price growth in 2013/14, with a stronger rise in 2014/15 on the back on increased confidence. Townsville should expect a greater upside to prices due to its more diversified economy, although both markets should experience moderate price growth.

Cumulative price growth over the three years to 2016 is expected to be 16 per cent for Townsville and 13 per cent for Cairns.

 

 

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