Brisbane home values are tipped for growth this year, following a mediocre recovery last year.
After Sydney rocketed to top spot for price growth in 2013 at more than 15 per cent, some property watchers have warned harbour city prices have peaked.
Low interest rates and heightened confidence buoyed last year’s market – particularly in Sydney.
Those conditions would carry into this year, but job uncertainty and a potential interest rate rise could mean capital growth runs out of steam, said Australian Property Monitors senior economist Andrew Wilson.
Dr Wilson was bullish throughout last year, but said Sydney’s price growth had peaked.
In the short term, agents expect the momentum generated last year to continue. Undersupply will continue to prop up Sydney’s market.
Tony Santoro of Laing+Simmons Liverpool said a “severe” stock shortage forced him to turn buyers away.
“Most of the new dwellings to hit the market are sold within a couple of days,” he said. “Buyers are having to pay record prices just to enter the market while many simply have to wait and hope that things improve.”
‘INCOMES IN QUEENSLAND SURPASSED THOSE OF NSW AND VICTORIA’
At the upper end of the Sydney market, Belle Property Neutral Bay principal Matthew Smythe said the 2013 spring selling season was exceptional. But he had worked through enough cycles to recall the tough times – optimism needs balance with caution.
Propell National Valuers economist Linda Phillips said solid wage growth had improved affordability, releasing pent-up buyer demand built up across Sydney since 2008.
Buyers then rushed to market as continuing price rises proved an incentive to act before increasing beyond reach.
Property pundits would look to Brisbane for price potential this year, Ms Phillips predicted.
Neil Smoli, managing director of research and advisory firm Aviate, said Brisbane investors were enjoying low median prices and strong returns.
He gave the example of $600,000 invested in Sydney, which would buy a one-bedroom city apartment at about $120,000 a square metre. In Brisbane, the investor could buy a two-bedroom, two-bathroom city apartment at about $7000 a square metre.
“Add to this comparative affordability the fact that average incomes in Queensland surpassed those of NSW and Victoria over the course of 2013, according to the ABS, as well as the weight of infrastructure commitments in Brisbane,” he said.
‘SIGNS OF A STRONGER RECOVERY’
SQM Research director Louis Christopher has forecast 4-7 per cent growth for Brisbane.
“I would not be surprised if the end result is at the top end of our range,” he said. “We are seeing signs of a stronger recovery now taking place in Brisbane’s east side.”
Mr Christopher said Melbourne’s market was always challenging to interpret and forecast. Supply factors will determine Melbourne’s growth this year.
“I think the reality on the ground is that the inner ring excluding the oversupplied areas of Docklands and Southbank have been performing well, which explains the rise in auction clearance rates compared to 2012,” he said.
“But from what we can see, the middle and outer ring of Melbourne have remained weak and that is because of the ongoing oversupply of house and land packages that still remain on the market today.”
Colliers International residential managing director Peter Chittenden said that although investors had been most active in Sydney and Melbourne, robust price growth and flat rents might lead investors to markets such as Brisbane, where gross rental yields were above the national average after only moderate growth last year.
Aside from Sydney, Mr Chittenden said all capital city values were still below their peak. He expects this year’s price growth will be in line with wages, which are expected to be below the 10-year average at 2.4 per cent.
Future interest rates will also shape values this year and offer another topic to debate.
Ms Phillips said most economists expected interest rates to rise in the second half of 2014. However, she noted that Westpac’s Bill Evans had suggested rates might fall by a quarter to half a percentage point next year.
Ms Phillips said Evans’ contrary view was worth noting as he had a habit of picking trends early.
“While anyone buying a house would be cheered by this news, it is based on the assumption that the economy will actually slow down or underperform more than most people expect,” Ms Phillips said. Source: AFR