Perth property market to rebound in 2011
Friday 31st December 2010
GOOD news for homeowners as a housing group tips Perth's property market to pick up strongly in 2011 as the latest mining boom gathers pace.

The Australian Property Monitors outlook is a different tune to other housing forecasters, who are predicting the WA’s property market to be flat next year.

In its annual State of the Market report, APM said Perth and Sydney were the cities likely to see a strong price growth increase, while the remaining capital cities would see more modest growth.

For Perth, it’s a turnaround for the property market, with APM reporting that house prices in the September quarter dipped 2.3 per cent to a median price of $518,597, a much higher figure compared to other forecasters’ projections.

For calendar 2010, Perth’s house prices posted a modest annual growth rate of 4.7 per cent.

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"The prospects for a return to price growth through 2011 however are excellent with Western Australia expected to experience one of the largest resources boom in its history,” APM said in its report.

"With numerous mining projects already set to commence in 2011, high demand for labour and increasing wages and salaries, together with burgeoning company profits will create a strong wave of commercial and business prosperity throughout the State and particularly in Perth.

"As a consequence it is likely Perth will experience the highest growth in median house prices of all Australian capitals in 2011.”

APM senior economist Andrew Wilson said the group is forecasting growth of 7 per cent in Perth for 2011.

Nationally, APM has forecast annual growth at 3 per cent in 2011 while CommSec economist Savantha Sebastian is tipping 5 per cent growth on the back of investor and first home buyer demand.

He said demand would be subdued in the first half of 2011 before accelerating in the last two quarters.

``Given the interest rate hikes we've had, it's likely to be a period of consolidation,'' Mr Sebastian said.

``Later in 2011, rental growth will be a major driver in attracting investors.''

Growth in investor finance would also underpin house price growth, he said.

``The only caveat is interest rises.''

Mr Sebastian forecast one interest rate rise for April next year and two in the second half of 2011.

AUSTRALIAN DOLLAR

A strong Australian dollar would keep Asian investors away.

Mr Sebastian said the resources centres of Perth and Darwin would experience solid growth while Melbourne and Sydney markets would also be well supported.

Economists, however, are divided over the Reserve Bank of Australia's (RBA) next interest rate move.

They predict there will be two or three interest rate rises next year.

BIS Shrapnel residential property project manager Angie Zigomanis said few first home buyers would return to the market in early 2011 and national house price growth would be capped at 5 per cent.

``I think the it'll be pretty soft next year,'' Mr Zigomanis said.

``Given the recent November rate rise, people will still be cautious.''

He predicts demand will pick up once investment in resources projects ramps up later in 2011.

``You'll see more people coming into the market,'' Mr Zigomanis said.

While many first home buyers had brought forward their home purchases over the past 12 months, buyer activity in that area would return to normal late in 2011, he said.

Mr Zigomanis said demand for residential property would improve as the economy and wages growth strengthened.

The RBA raised the cash rate four times over the past 12 months to its current 4.75 per cent.

An International Monetary Fund (IMF) report this week found Australian house prices could be overvalued by as much as 10 per cent, but it also said strong population growth and rising income would continue to underpin the market.

Meanwhile a recent Westpac consumer survey showed a sharp rise in the Time to Buy a Dwelling Index, which increased 15.8 per cent in November to the highest reading since August.

Westpac senior economist Matthew Hassan said the November interest rate rise appeared to have had ``little lasting effect'' on attitudes towards house purchases.

``Although affordability remains tight, consumers may see the somewhat softer market conditions and flattening out in house prices over the last six months as an opportunity for buyers,'' Mr Hassan said.

He said the result suggested housing markets were ``well placed'' to absorb the last month's interest rate move.

Sourced from PerthNow - Rebecca Lawson, Business Reporter, 17 December 2010
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