Australia's major property markets are poised for double-digit growth in the next three years as rents escalate and the credit market stabilises, according to a leading economic forecaster.
BIS Shrapnel noted in its report that with national population growth of 1.5% expected in 2008/09 - the highest since the late 1980s - Australia is experiencing record net overseas migration inflows, which is underpinning what is already strong, underlying demand for housing.
"With construction of new dwellings below previous peak levels, a rising deficiency of dwellings is also evident in the extremely low vacancy rates and will drive strong rental growth in most cities," the report said.
Senior project manager with BIS Shrapnel and Residential Property Prospects, 2008 to 2011 report author Angie Zigomanis said rising rents and improving credit conditions will be the key to the next upturn in prices in most capital cities.
"As credit conditions recover over the course of 2009, we expect banks will gradually pass on lower borrowing rates to customers. This easing will enable house price growth to pick up in many centres during 2009/10 and 2010/11," Zigomanis said.
BIS Shrapnel said it expects Sydney's median house price to grow by 18% to $650,000 over the three years to June 2011, with the strongest growth coming through at the end of the period.
Melbourne's median house price is expected to climb by a total of 16% over the same period to $530,000. Despite fears of low affordability and threats of oversupply in the unit sector, BIS Shrapnel forecasted Darwin's house prices to jump by 21% to $515,000. Investors in Brisbane are set for a windfall, with house prices expected to surge by 22% to $515,000. Adelaide is forecast to grow by 16% to $425,000 and Canberra by 15% to $530,000.
While BIS Shrapnel forecasted another interest rate rise in September quarter 2008, it said the average cost of renting is set to rise much more than the cost of buying in 2009 and 2010, due to the undersupply of new housing.
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