GAIN BEFORE PAIN FORECAST FOR BRISBANE HOME MARKET

Written on the 23 June 2014

GAIN BEFORE PAIN FORECAST FOR BRISBANE HOME MARKET

HIGHER supply levels and rising interest rates are poised to hurt residential property prices in Brisbane, but the good news is that home owners are in line for healthy gains over the next two years.

Economic forecaster BIS Shrapnel says it expects Brisbane’s price growth momentum experienced last year to continue until 2016, when it sees conditions changing.

The Residential Property Prospects report shows low interest rates have been a catalyst for the recent upturn in the Brisbane market.

The study’s author, Angie Zigomanis, says housing affordability at current interest rates will maintain further price growth for now.

“The current standard variable rate of 5.95 per cent is, outside of the GFC emergency low interest rates in 2009, the lowest level in over 40 years,” Zigomanis says.

“As a result, affordability in most capital cities remains at early-2000 levels, which should be supportive of price growth.”

Zigomanis says first-home buyer demand has weakened following government changes to incentives, while low interest rates have had minimal impact.

Investors and “next time buyers” have picked up the slack in this area, as the economy’s momentum swings from the resources sector into business and residential consumption.

“The Reserve Bank is expected to enter a tightening phase towards the end of 2015,” Zigomanis says.

“Initial rises are likely to have a limited effect with the economy strengthening, although further rises will more significantly impact on affordability and prices through calendar 2016, while also eventually having the desired effect of slowing economic growth and inflationary pressures,” he says.

The strongest capital city-price growth within the next three years is expected to come from Brisbane, following improvements to housing affordability and low dwelling construction.

Brisbane and Sydney will be the only markets to experience growth in house prices by June 2017, with other capital cities expecting to record declines.

“The pieces are falling into place for the Brisbane residential market to continue to strengthen,” Zigomanis says.

“However, the pace of price growth is likely to be moderate, with economic conditions still relatively subdues and net interstate migration inflows are at low levels.”

As a result, a total rise of 17 per cent in the median house price is forecast over the next three years.
 

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