House prices tipped to jump sharply in the next three years

Housing prices could increase by up to 22% during the next three years, according to a new survey, while the weekend’s auction results continue to signal increasing confidence in the property market.

The new BIS Shrapnel Residential Property Prospects 2009 to 2012 report says that “the conditions are ripe for a sustained recovery in residential property prices”.

“Low interest rates, solid growth in rents and housing shortages are evident in most markets. However, the current economic malaise will mean confidence will only recover slowly during 2009/10.”

The report claims Sydney, Melbourne and Adelaide will record the largest price increases over the next three years at 19%. Growth in Brisbane, Hobart and Canberra is also expected, but Perth and Darwin are expected to experience weaker conditions due to lower spending in the natural resources market.

The report estimates Sydney’s median house price will rise from it current level of $530,000 to $630,000 by mid-2012. Melbourne’s median will rise from $425,000 to $507,000, with Adelaide’s to rise from $360,000 to $430,000.

Brisbane’s prices will rise from $391,000 to $455,000, Perth’s will grow from $425,000 to $475,000 and prices in the Gold Coast, the Sunshine Coast and Cairns should rise by 14%.

The report claims that most of the growth in the property market is occurring because of first home owners, but that as the economy recovers more investors will enter the market over the next 12 months.

Meanwhile, auction results have recorded more gains over the weekend, giving weight to claims that the property market is beginning to see some recovery.

In Melbourne, clearance rates rose above 80% again, leading Real Estate Institute of Victoria chief executive Enzo Raimondo to comment that “the recent succession of clearance rates in excess of 80% indicates improved confidence levels in the overall economy”. The city recorded 448 sales totaling $263.83 million.

In Sydney, the nation’s largest property market, clearance rates reached 76%, with 191 properties selling at a total of $121.29 million.

Brisbane clearance rates reached 71%, with 17 properties selling at a total of $8.5 million, while Adelaide saw just seven properties sold at a total of $2.6 million.