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We ask leading property market analysts what lies ahead for buyers and sellers in 2002.
It has been a heady five years for property markets across Australia. House values in every major capital city have increased. In some parts of Melbourne and Sydney, house prices have doubled.
The key factors behind the recent property price boom – interest rates, the First Home Owners Grant scheme and good economic growth – will also play a big part in the post-boom shakeout. Here is what some leading experts have to say:
“The ending of the additional $7000 First Home Owner’s Grant, rising interest rates and modest economic growth will dampen, but not reverse, price increases in the residential property sector over the next three years.”
“In our new report, Residential Property Prospects 2002-2005, we forecast price rises of between 6 per cent and 27 per cent for capital cities over the three years to June 2005. However, in real terms (after accounting for inflation) prices will decline in Adelaide and Hobart, the two weakest markets.”
“We predict that by June 2005, median house prices will rise by 22 per cent in Sydney, 27 per cent in Brisbane, 13 per cent in Melbourne, six per cent in Adelaide and Hobart, 11 per cent in Canberra and 16 per cent in Perth.”
“The property market is not poised for a bust. Over the next few years there will be periods of easing, particularly as rates rise but we believe the overall market will be healthy. We are certainly not going to see a major downturn.”
“When people are buying real estate in the market today, they need to factor in higher rates over the next few years. But we don’t believe rates will be very high and given that the economy is in such good shape, the outlook is very positive.”
“Of course that depends on what happens with interest rates in the future. If the Reserve Bank increases them severely in a short period of time, then we will certainly see an easing (of price rises and demand).”
“Rising interest rates, more moderate growth prospects, a progressive ageing of the population, and projected rises in the cost of funding health and welfare sectors for retirees have set the alarm bells ringing for Australian property investors.”
“These factors are requiring investors to modify their strategy and build in some additional safety nets to shield them from short and long-term changes.”
“The effects of tightening monetary policy are likely to be felt for the remainder of 2002 and possibly for the first half of 2003. In the short-term a moderation in buyer demand and price growth, and higher levels of affordability are the key outcomes to watch for. Unless we see a rise in interest rates into double digits, it is likely that property prices at the quality end of the market will continue to rise.”
“Growth in the Melbourne and Sydney residential property markets should moderate back to 8-12% per annum. These factors will pave the way for stronger conditions in 2003-2004 against a climate of controlled inflation and interest rates that are still historically low despite recent rises in the cash rate. The next six to nine months provide a window of opportunity for astute investors to buy exceptionally well.”
“On any objective analysis it is a time to be extremely cautious about residential property investment. I believe the broad property market is as vulnerable to poor returns and capital losses as any time in recent decades.”
“It has only been in the last 12 months that the market has showed the excesses that typify a bubble. Moreover, identifying a bubble does not mean prices cannot go higher. The nature of bubbles is that they tend to go higher than people expect, although they also tend to fall further than people expect when the bubble bursts.”
“Therefore, when the bubble bursts prices could easily fall markedly, perhaps even to below levels of 2-3 years ago. Remember also that similar sorts of argument were also used to justify the technology boom.”
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