HOUSE price growth is set to slow nationally this year as low inflation, weak wages growth and oversupply worries in some cities put the brakes on recent rises.
And the popular claim that home prices double every 10 years has become a myth, as a News Corp Australia analysis shows that only Sydney delivered on that promise in the past decade and forecasters say no city will grow this much in the coming 10 years.
From 10 per cent-plus growth in 2016, most independent forecasters expect home prices to rise about 5 per cent nationally as the likelihood of another Reserve Bank interest rate cut diminishes and hot markets in Sydney and Melbourne start to cool.
“We are expecting slower growth, in the region of three to five per cent,” said CommSec chief economist Craig James.
“However, we had underestimated the demand that was out there in 2016. The Sydney market still remains quite buoyant,” he said.
Each city has its own property price cycle and different supply and demand issues. Sydney and Melbourne have boomed, Perth and Darwin dropped as the mining boom petered out, while other cities have been relatively flat.
“It’s basically been Sydney and Melbourne then daylight comes next,” Mr James said.
An analysis of Real Estate Institute of Australia data shows that Sydney’s house prices have surged exactly 100 per cent in the past decade, while its unit prices rose 95 per cent.
No other capital city saw prices double in the decade — Melbourne houses were next best (up 94 per cent), Darwin 57 per cent, Adelaide 51 per cent, Canberra 51 per cent, Brisbane 45 per cent, and Perth and Hobart 23 per cent.
Mr James said increasing supply — particularly in apartments in Sydney, Brisbane and Melbourne- should slow down price growth. “Across the country a lot of new buildings have been approved and are under construction. When wages are growing at 2.5 per cent it’s hard to sustain growth in home prices at these levels.”
Metropole Property Strategists CEO Michael Yardney said property markets would be fragmented in 2017 depending on local economic strength and supply and demand, with two-thirds of full time jobs likely to be created in Melbourne and Sydney to underpin continued outperformance there.
“The elephant in the room is the huge oversupply of new apartments being completed in Brisbane and Melbourne,” he said.
Most areas of Australia were unlikely to double in price over the next 10 years, Mr Yardney said.
“We’re now at a time of lower inflation, lower interest rates, lower economic growth and lower wages growth, so it’s likely we’ll have lower capital growth of property in the next decade,” he said.
However, some suburbs would outperform. “In the last five-year Census period, while overall wages growth in Australia was 20 per cent, some municipalities had 40 per cent wages growth. In general these were the gentrifying inner and middle ring suburbs where affluent owner occupiers with higher disposable income wanted to live and could afford to pay for the privilege of living there.”
Originally Published: http://www.goldcoastbulletin.com.au/