Market conditions in cities like Melbourne and Sydney are ripe for a sustained real estate recovery according to the latest analysis from economic forecasters BIS Shrapnel.
Investor confidence is spilling over into the real estate market, says the company's Residential Property Prospects 2009 to 2012 report.
Low interest rates, high rents and housing shortages are evident in most markets and investors will take over from first home buyers toward the end of 2009 to keep demand for residential property going.
'By the end of 2009, strong turnover of the most affordable properties will be flowing through into the bulk of households positioned towards the middle of the market, as people who have sold their existing dwellings to first-home buyers upgrade to their next home,' said senior project manager Angie Zigomanis.
'We expect rising confidence in the prospects for an economic recovery in 2010, so investors are likely to return in greater numbers, attracted by increased rental returns and low interest rates. In many instances, rental returns are now running close to mortgage repayments,' she added.
BIS Shrapnel estimates that the media house price in Sydney could rise by 19% while other cities are expected to see price increases of at least 11%. Perth is expected to experience prices increases of 12%. On the Gold Coast, the Sunshine Coast and Cairns prices could rise by 14%.
Falling interest rates and first time buyer incentives are given the credit for preventing the Australian property market from a catastrophic decline in 2008. Although property prices weakened they could have been worse, the report says.
'Substantial reductions in interest rates and the expansion of first home buyer incentives appear to have halted the decline in early 2009. Together with rising rents and yields, the improved affordability is having a positive influence on price, particularly at the more affordable end of the market,' the report points out.
But it does warn that recovery will not be instant. 'The economic environment has continued to deteriorate and unemployment is rising,' it says.
