Growth will continue over the next year, with increases becoming more balanced across capital cities, according to a new report.
The latest QBE Australian Housing Outlook 2014-2017
predicts that an undersupply of housing stock will be a key growth indicator in 2014/15, especially in Brisbane and Sydney.
QBE CEO Jenny Boddington said new dwelling starts were currently exceeding underlying demand in most states, but it will take time for this to have an impact on tight vacancy rates and, in turn, price rises.
“Interestingly, the report has forecast a dampening of growth before prices begin to stagnate as early as next year.”
A combination of further price growth, an easing of housing undersupply and likely changes to interest rate policy will cause price growth to slow across most cities from 2015/16.
Brisbane is forecast to have the strongest price growth (+17%) over the next three years. This is largely due to an undersupply of stock set to continue over the period.
Sydney (+9%), Melbourne (+5%), Adelaide
(+6%) and Hobart (+5%) will experience some price growth, but they will all experience rising supply issues through to 2016/17.
Weak price growth is forecast for Perth
(–2%), Canberra (+1%) and Darwin
(+2%). This is due to declining resource sector investment in Perth and Darwin and public sector cuts combined with an oversupply in Canberra.
Boddington added that, while affordability has deteriorated markedly in Sydney and Melbourne, affordability in other capitals has remained steady or actually improved slightly.
“It is projected affordability at current interest rates can accommodate further price growth.”
The report also noted that strong population growth has been one of the major drivers of demand.
However, net overseas migration flows weakened in the year to December 2013 and this trend is forecast to accelerate over the next three years.
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