Property prices set to soar again

Our property markets are on the move again and “double-digit house price growth is forecast across all capital cities from June 2009 to June 2012, particularly in those markets with positive affordability,” according to mortgage insurer QBE LMI chief executive Ian Graham.

The annual LMI Housing Outlook report predicts that Adelaide housing prices will increase 23% by the middle of 2012, the biggest rise in values of all the capital cities, and nearly twice the growth rate of Perth and Canberra.

The Sydney residential property market, which hasn’t seen a rise in median house prices for almost six years, will return the second best result with compound price growth of 21%, in the three years to June 2012.

In Melbourne, median home prices are forecast to increase 19% by mid-2012.

In Darwin, which has been booming for the last few years, and where median house prices increased by 15.34% in the last 12 months, is forecast to rise 17% while Brisbane and Hobart is set to rise 15%, and Perth and Canberra 12%.

The Australian reports Graham as saying: “Despite a 0.25% rate rise in the first week of October, housing interest rates are expected to remain at a stimulatory level for some time, with the low interest rate environment remaining supportive of the first home buyer.”

“A broad-based recovery is forecast from the second half of 2010 as conditions in the labour market stabilise and investors and buyers are attracted back into the market by low interest rates and high rental yields.”

The report said flatter economic growth this year and into next would result in the Reserve Bank pausing interest rises until the second half of 2010 with rates rising more strongly thereafter. It also predicts that the low vacancy rates will drive strong rental growth in all our capital cities next year, but that rental growth will then moderate from 2011 as more new housing is built.

The report forecasts price growth to ultimately slow from 2012-13 as the RBA raises interest rates in response to emerging inflationary pressures and lower unemployment as our economy improves.

Yes the property cycle is moving on… but remember median house prices in our capital cities have increased by 9.91% per annum over the last 10 years, so while these forecasts are good news, they are not as spectacular as some media sources would suggest.

Of course this is just what the median house price is likely to increase by, meaning that 50% of property values will increase more than this and 50% of property owners won’t enjoy these increases in value to their properties.

As always the fundamentals of buying:

1. The right property (one that will be in continuous strong demand by having some scarcity value).
2. In the right location – a suburb that has outperformed the averages in long-term capital growth.
3. At the right price – based on research, not emotion.
4. At the right time in the property cycle – which seems to be now.

…should ensure the value of your property investments perform strongly.

Michael Yardney is the director of Metropole Property Strategists, a best selling author and one of Australia’s leading experts in wealth creation through property. For more information about Michael visit www.metropole.com.au and www.PropertyUpdate.com.au.