Sydney, Perth and Brisbane will show the strongest price growth over the next three years, fuelled by supply constraints.
BIS Shrapnel's latest market report is arguing that, while the property market will remain steady this year, moderate growth will appear in the above capitals from 2012 onwards.
"Sydney, Perth and Brisbane will show the strongest price growth through to 2014," said senior manager and study author Angie Zigomanis. "These markets are currently building new dwellings at well under the level of underlying demand, while price growth has also been relatively weak in these cities in recent years, causing affordability to be improved from previous lowest levels. With economic conditions and income growth to be strongest in Western Australia and Queensland (and to a lesser extent New South Wales), this should underpin moderate price rises averaging 5-6% per annum in the three years to June 2014."
In general, BIS Shrapnel expects the market fundamentals to improve as resources investment flows through to the rest of the economy.
"Strengthening employment growth – the unemployment rate is forecast to fall below 4% in 2013 – will also see net overseas migration inflows turn around, and the underlying demand for new dwellings begin to rise," added Zigomanis.
First home buyers returning to the market in greater number will also underpin the recovery.
“Potential first-home buyers will not stay out of the market forever,” said Zigomanis. “At some point many will reach a life stage where they will want their own dwelling. If higher interest rates mean they can’t afford their first choice of dwelling initially, then they will purchase a more affordable type of dwelling and/or in a more affordable neighbourhood. In any event, this period will allow future first-home buyers to build up their deposit and take advantage of softer house prices."
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