Brisbane on the boil
If you are wondering when Australia’s housing market will start to hot up, BIS Shrapnel’s chief economist Frank Gelber believes 2009 to 2012 will be the years.
‘‘ This is the build- up, but it won’t be as hot a market as in 2003,’’ he says.
Gelber says to expect price growth of 25 to 35 per cent in the next upswing ( 2009- 2012), compared with the last boom, where prices doubled between 1999 and 2003.
Rather than rapid price growth, the next housing cycle will be marked by a surge in construction, particularly in Sydney, Gelber says.
‘‘ By the end of the period we will have to build 60 per cent above the current level to meet demand,’’ he says.
There has been little building activity for some time, with construction levels falling by one- third after the last housing boom collapsed.
Lack of affordability will drag on the next housing cycle with the last boom producing construction costs that have not really abated.
BIS Shrapnel notes that it is still usually cheaper to buy an existing house than build a new one.
While housing affordability is set to be a key election issue, the percentage of a wage that it takes to pay the home loan is much less now than in the late 80s when a house- price boom fol- lowed by interest rates peaking at 17 per cent meant that in Sydney it took 86.7 per cent of a household’s earnings to pay the mortgage in 1989, according to BIS Shrapnel.
In Melbourne it was 68.8 per cent and other cities hovered around the mid- 40 per cents that year.
Last year, home loan affordability ranged between 35.5 per cent in Adelaide and 59.6 per cent in Sydney.
So if you are
of buying in the next few years, which will be the most affordable city? Unfortunately, affordability is worsening in most cities, according to BIS Shrapnel.
Adelaide is still looking the best, at 37.9 per cent next year, but then worsens marginally.
Sydney becomes more affordable, with 55.5 per cent of earnings needed to pay a mortgage in 2009, and then gets worse again.
For Melbourne and Brisbane it gets worse from here on in as the housing markets in those cities recover and prices grow.
In Perth, where prices are easing, 2010 is the year with the best affordability rating at 43.9 per cent.
Agent Colliers PRD says investors have been returning to the property market since last year.
The group’s national research director, Tim Lawless, says the latest release of housing finance data from the Australian Bureau of Statistics shows investor finance commitments increased by $ 1.3 billion between the start of 2007 and the end of May, with investors borrowing $ 6.9 billion in May.
‘‘ The level of investor borrowing for housing hasn’t been this high since November 2003,’’ he says.
Rental yields are finally becoming more ‘‘ acceptable’’ for investors, Lawless notes.
‘‘ Most capital cities are experiencing record lows in rental housing vacancy rates and rental rates are increasing consistently.’’
Lawless says Perth and Darwin are the only markets with a shadow overhanging their future performance.
Both markets appear to have had their run, says Lawless, with quarterly housing price growth rates returning to more sustainable levels of 2.1 per cent for Perth and 2.8 per cent for Darwin.
Sydney is moving off the bottom of the housing cycle and Lawless sees a positive future, with rental vacancy rates at historic lows and the flow of migration to Queensland slowing down.