Real Estate House Prices to rise 23%- Have you missed the Boat?

House prices are expected to increase by 23% over the next 3 years according to QBE. Property investors are poised to reap big gains over the next 10 years as housing shortage continues to worsen according to a new report.

Low interest rates and a shortage of affordable housing, coupled with growth in rental rates-rental investment, will continue to drive up house prices – despite the threat of higher borrowing costs, according to the QBE Lenders’ Mortgage Insurance (QBE LMI) Housing Outlook 2010-2012.

Adelaide property, where property is the most affordable, is expected to see the strongest price gains, clocking a 23 percent rise over the next three years.

Meanwhile, housing shortages in Sydney property and Melbourne property should drive growth of 21 percent and 19 percent respectively, LMI predicts.

Recent strong growth in Darwin property will be tempered by the weakness in the resources sector, although homes should still enjoy price surges of up to 17 percent.

Price growth in Brisbane property and Hobart property is expected to be dampened by risks to the local economy, with property in both cities seen rising in value by 15 percent.

Perth property is expected to continue to suffer as the mining sector slows, and the stalling job market could hit Canberra property, leading to more modest property price rises of just 12 percent over the next three years in both cities.

Ian Graham, chief executive of QBE LMI said the outlook was particularly good for first home buyers who have recently joined the housing ladder, and should also lure more investors back to the market.

Infinity Apartments

Infinity Apartments

In their latest update, The Housing Industry Association (HIA) estimates that by 2020, taking into account of the current population projections and home building trends, Australia will see a accumulated housing shortage of 466,000.

“If we don’t get a comprehensive supply response to the accumulating housing shortage, then the lack of affordable and appropriately located rental properties will only worsen, while pressures on existing home prices will continue at an undesirable rate, placing avoidable upward pressure on interest rates,” Ben Phillips, senior economist with HIA.

Rents are also expected to sky rocket as a result of this chronic under supply. Over the last two financial years, rents have grown across Australian capital cities by 14.2% or about 10% higher than the cost of living according to HIA.

Phillips noted that the $90 billion worth of resource projects on the books is expected to demand an additional 136,000 direct and indirect jobs, placing further constraints to the low housing supply, supply of labour and materials in non-resource regions.

Australia’s property markets keep growing stronger as evident by the latest figures from Residex (see table below),

Houses

Units

Growth

Growth

Growth

Growth

Area

Median value

Jan 09 to Jan 10

10 year average

Area

Median Value

Jan 09 to Jan 10

10 year average

ACT

$494,500

8.06%

10.65%

ACT

$386,500

4.76%

10.86%

Melbourne

$539,000

14.46%

10.24%

Melbourne

$421,500

15.98%

10.02%

Brisbane

$475,000

7.44%

11.95%

Brisbane

$360,500

4.80%

10.49%

Sydney

$629,000

13.10%

6.47%

Sydney

$443,500

11.38%

6.11%

Perth

$487,000

1.43%

11.88%

Perth

$394,500

5.90%

11.24%

Hobart

$363,000

4.01%

11.91%

Hobart

$272,500

8.04%

12.03%

Darwin

$505,500

12.24%

11.40%

Darwin

$403,000

17.40%

11.00%

Adelaide

$400,500

8.82%

10.44%

Adelaide

$305,000

7.71%

11.45%

Source- Residex

Considering all of these factors effecting house prices –

  • Pent up buyer demand,
  • Slowdown in new dwelling construction and
  • Rapidly growing population;

are adding to the surging property wave. Even the Reserve Bank Governor is quoted as saying that Real Estate housing prices are growing rapidly. All this points to the fact that there’s no denying that we are on the brink of some pretty solid boom conditions as the property cycle moves into overdrive over the coming months.

The question many home buyers and property investors are asking now is- have I missed the boat?

My thinking is that in 2010 (as evident already from the above table) Australia’s capital cities can expect prices to increase significantly.  I am a strong believer that property investment or home purchase has to be considered as a long term investment, so I still believe it’s not too late to make a move.  If you are looking to buy investment property the number one priority has to be to ensure that you are buying right and buying smart.

If you would like to discuss your situation with Property experts and get property advice to invest in property and take advantage of the property boom please call the RBA team on 02 9144 4470 or via email info@rbaproperty.com.au. We are happy to discuss (confidentially) what you can afford and the right type of property for you – whether you are looking to buy your first home, upgrade or invest, as well as answer all your questions.

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