Property prices seem to be on the move almost everywhere, so to find out how the current growth phase is likely to play out, we asked John Lindeman, director of innovative housing market analysts, Property Power Partners to give us a summary of the current and predicted housing markets in our major capital cities – with both encouraging and surprising results.
John says: ‘Our forecasts don’t rely on a crystal ball - we use patented and proven prediction methodologies to provide highly accurate forecasts of the change potential for house and unit prices and rents at suburb level. Our research shows us that one of the main reasons for the current growth wave is the readiness of banks to lend to established home owners wishing to move and improve. Not only do these upgraders have equity and proven repayment records, but their purchasing power has grown as incomes have risen and interest rates fallen in recent years. While this ripple is likely to spread to other areas of the market, such as first home buyer suburbs as banks loosen their purse strings more, it can’t last long in the suburbs where it started.
We recently analysed the current and predicted change in the house markets for all the suburbs in our state capital cities and provide the results below. The legend on the right shows you how we describe each suburb’s current and predicted house market.
Surprisingly, some suburbs will even become stressed markets within the next year and the total number of stressed and buyer suburbs where prices fall is set to rise to a quarter of the total, so investment in the right suburbs will be crucial.
MELBOURNE’S HOUSE MARKET – A PRICE RIPPLE, NOT A BOOM
Almost seventy per cent of Melbourne’s suburbs are currently seller markets with rising prices, which will become apparent when other data providers release their figures in a month or so. Price growth in many suburbs will lead to boom conditions in one fifth of Melbourne’s suburbs around median price range and over, but our forecast also shows that within the next year, only one quarter of Melbourne’s suburbs will be seller markets. Once the ripple has passed, more than a quarter of Melbourne’s suburbs will become buyer markets with falling prices and another ten per cent will become stressed markets.
HOBART’S HOUSE MARKET – STRESSED AND BOOM SUBURBS EMERGING
Half of Hobart’s suburbs are currently neutral, with most of the remaining suburbs seller markets where house prices are slowly rising. Our forecast shows that over a quarter of Hobart’s suburbs will become buyer or stressed suburbs with falling house prices in the next years, while another quarter will become boom and seller suburbs where prices are rising. This effect will therefore create the impression that Hobart’s house prices are not moving at all. Our analysis shows this to be totally untrue, but care needs to be taken in this market because the number of stressed suburban house markets will be nearly as great as the number of booming suburbs.
ADELAIDE’S HOUSE MARKET – MOVING FROM NEUTRAL TO GROWTH
While Adelaide’s house market appears to be going nowhere, nothing could be further from the truth. Nearly a quarter of Adelaide’s suburbs are forecast to become booming house markets, while just under a quarter will be in growth over the next year.
SYDNEY’S HOUSE MARKET – BOOM SUBURBS ARE ABOUT TO RETURN
Nearly eighty per cent of Sydney’s suburbs are currently seller markets, experiencing house price growth and there are no stressed suburbs where prices are falling and no growth is likely, but there are no boom suburbs either. This is all set to change, as our short term prediction shows that over one quarter of Sydney suburbs will experience boom house market conditions over the next year with strong price growth and another quarter predicted to become or remain seller suburbs.
BRISBANE’S HOUSE MARKET – MOVING FROM NEUTRAL TO GROWTH
Over half of Brisbane’s suburbs have neutral house markets, with no growth or decline in prices, but our forecast shows a fragmenting of the market, with an increase both in the number of seller and also in boom suburbs, but also in the number of buyer and stressed suburbs. Brisbane does not suffer from a severe housing shortage and price falls on the Gold Coast and Sunshine Coast have acted like a brake on the city’s housing prices. While there are increasing opportunities for growth, investors need to take care about their potential property locations.
PERTH’S HOUSE MARKET – FROM SELLER TO BOOM SUBURBS
It’s been a long time since we’ve seen a capital city with better investment prospects than Perth has right now and our predictions show that over three quarters of Perth’s suburbs will continue to have house price growth over the next year. Most of these will be boom suburbs, with strong continuing price rises. The causes are the state’s strong economic performance, a willingness of banks to lend, record population growth and an acute housing shortage. However, while growth markets can change quickly to boom suburbs, our experience shows that such boom markets usually don’t last long. High growth is a sweet but short occurrence, so, investors should take care to buy only in those suburbs which have the greatest potential for sustained growth.
John Lindeman is chief property consultant at innovative housing market analysts, Property Power Partners and a popular researcher, author and presenter on the nature and dynamics of the Australian residential property market.
For more information, visit www.understandproperty.com.au