The latest QBE Australian Housing Outlook report forecasts that Canberra will be the market leader on house price growth over the next three years.
The report forecasts that housing price growth between now and 2020 will be: Canberra 16%, Hobart 11%, Melbourne 10%, Brisbane 7%, Adelaide 7%, Perth 3%, with no change in Sydney and Darwin falling 1%.
Infinite Wealth’s observation is that – as is often the case with such reports from the periphery of the housing industry – the forecasts are extremely cautious and conservative, and that the eventual growth numbers will be larger.
We note also that experienced real estate analyst Louis Christopher of SQM Research has recently published price growth forecasts which are considerably more bullish that the QBE assessment.
We think the growth in Canberra and Hobart over the next couple of years will exceed the QBE forecasts. We also expect Brisbane and Adelaide to do better – and that Perth, which is moving into a recovery phase, will show growth well above the forecast 3% in the next three years.
We tend to agree with the QBE assessment for Melbourne, with a slowdown in price growth rates, and for Sydney, which is unlikely to show much in the way of price growth in the next few years.
The QBE report’s generalised national outlook for house and unit prices is that they are likely to become “more subdued” over the next year or two.
“Many markets are now building too much stock, particularly units after new dwelling starts peaked at a record 233,600 dwellings in 2015-16,” the report says.
“Restrictions on bank lending to investors are expected to be an increasingly prominent feature of the outlook for the market over 2017-18. This will most likely reduce investor purchaser activity and slow price growth. Owner-occupier demand is also expected to weaken, as the emerging downturn in new dwelling commencements translates into lower building activity over 2017-18 and 2018-19 and negatively affects the economy.”
At Infinite Wealth, we think they’re over-rating the impact of national events, such as the APRA measures to slow investor borrowing, and under-rating local economic events, such as the relative strengths of the various state and territory economies and the degree of spending on infrastructure in the capital cities.
The QBE report generally expects Sydney house prices to drop marginally in 2018 and 2019, before returning to growth in 2020. Melbourne prices are expected to continue growing, but at a reduced growth rate, while Perth is tipped to return to price growth in 2019 and 2020, after several years of decline. Canberra is forecast to show the strongest growth in prices, including rises of 7% in 2018 and 6% in 2019.
QBE Australian Housing Outlook report forecasts price decline in several capital city apartment markets over the next three years.
It forecasts that Sydney median unit price will show small decreases in each of the next three years. with an overall decline of about 4% over the three years to 2020. Melbourne is also tipped to experience some price decreases, with the median apartment price forecast to drop 5% in the next three years.
The most negative assessment is for the Brisbane apartment market, where QBE expects prices to drop around 2.5% in each of the next three years, leaving the median unit price around 7% lower in 2020 compared to 2017.
The most positive outcome is predicted for Hobart, where QBE foresees apartment prices rising 9% by 2020. Canberra and Adelaide are also expected to have rising apartment prices, but with only moderate increases.