Sydney, Perth and Adelaide housing markets tipped to outperform
Perth, Sydney and Adelaide are the most likely markets to outperform in the next 12 months with two out of five property valuers predicting house prices in those cities to increase by up to 10 per cent, a new poll shows.
More than three out of five valuers surveyed were also expecting house values to lift nationwide, and two fifths were forecasting as much as 5 per cent increase, CBRE’s inaugural Quarterly Residential Valuations Property Market survey finds.
Valuers were also relatively bullish on the apartment sector with 44 per cent predicting prices to increase over the next 12 months.
Apartments in Brisbane, the Gold Coast, Sunshine Coast and Sydney were likely to post the strongest price growth, with more than one out of seven valuers anticipating between a 5 per cent and 10 per cent rise.
The outlook for house and apartment prices was largely driven by the strain on the rental market as well as by housing affordability, said Sameer Chopra, CBRE’s Pacific head of research.
“Low rental vacancy rates are driving up rental prices, prompting some tenants to consider apartment purchases due to overall housing affordability,” he said.
“Early signs of value growth in the property market are emerging, driven by purchasers willing to buy ahead of potential interest rate cuts.”
More than half of valuers were expecting buyer demand to increase in the next 12 months, with the ACT, Melbourne and Sydney predicted to rack up the largest growth.
So far, six times as many valuers – or 49 per cent of respondents – reported strong to very strong purchaser demand in their local markets over the past three months, compared with those reporting soft or very limited demand.
Valuers found demand was particularly strong in Perth, Adelaide and Brisbane, as these cities further benefit from affordability and lifestyle drivers. In contrast, valuers reported softer demand in the ACT, regional Victoria and Melbourne.
Those trends mirrored dwelling price movements during the same period that showed Perth values jumping 5.2 per cent, Adelaide rising by 3.6 per cent and Brisbane lifting by 2.9 per cent CoreLogic said. By contrast, the ACT edged up just 0.3 per cent, regional Victoria slipped 0.1 per cent and Melbourne fell 0.6 per cent.
The survey also highlighted a high level of demand from upgraders and downsizers, buyer segments who were less sensitive to interest rate movements, Mr Chopra said.
“While there is an issue around affordability, high interest rates being the culprit, a reasonable part of the market is less sensitive to this when acquiring property,” he said.
“These buyers can be more resilient with interest rate rises that’s why properties are getting traded and why house prices are climbing even though interest rates are high.”
Two-thirds of valuers reported strong demand from first-home buyers and upgraders, while more than two fifths said local and interstate investors, along with downsizers were the most active buyers.
First-home buyers were the most active buyer type in Melbourne, Adelaide and ACT over the past three months, while upgraders dominated Sydney metro and outer metro such as Newcastle and Wollongong as well as in the ACT.
Interstate investors accounted for the largest portion of buyers in Perth, Brisbane, the Gold Coast and the Sunshine Coast, however, local investors were more active in Adelaide and Sydney.
Houses and recently renovated properties were the most sought-after by buyers, while many shunned fixer uppers and development sites.
More than one out of five valuers reported a decline in demand for vacant land and unrenovated properties, likely due to higher construction costs.
“There’s been a clear reduction in demand for unrenovated older homes, which were taking longer to sell and for vacant land because buyers are unwilling to take on construction risk,” Mr Chopra said.
“I think weak demand for unrenovated properties and vacant land will ultimately create tighter market conditions.
“Construction cost is high and funding is pretty expensive. We need interest rate cuts to get construction going.”
Original Source – Australian Financial Review