Bris­bane on the boil

The Weekend Australian - Review - - Prime Space - From Page 1

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

think­ing

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.

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