“Housing Boom and Bust 2012/13 Report” SQM Research

One of Australia’s most respected and dynamic property analysts, SQM Research’s Louis Christopher, has recently released his annual “Housing Boom and Bust 2012/13 Report”. This report provides a keen insight into the state and prospects of the Australian property market.

At the most fundamental level, the report provides solid news for average property owners and, as a consequence, the broader Australian economy. Christopher contends that “the remainder of 2012 and 2013 is likely to see a recovery in dwelling prices” and that “the lower end of the capital city market is likely to outperform the upper end”. The recovery will be driven by the impact of low interest rates on the lower and middle end of the market.

Importantly, the main impetus of the recovery is likely to occur in markets that have struggled over the last five or so years. Christopher said “the best performing areas in Sydney are going to be in Sydney’s outer ring, particularly in the west and south-west”. He also identified the struggling Queensland Gold Coast and Sunshine Coast regions as areas nearing a property value floor.

Christopher pointed to low vacancy rates in these areas as a sign of strong demand for middle and outer-ring property.

“Given the rate cuts that have happened many renters who are living out there would now like to be buyers,” he said.

“It’s better news for sellers. If they are looking to sell in the next 12 months they will probably see more buyer demand.”

As always, however, there are risks. The report analyses the impact of five scenarios on the market for 2012/13. In the first and most likely scenario, the commodity boom experiences a downturn, causing the terms of trade to fall and then level out. This scenario assumes that the dollar will be close to parity and the Reserve Bank will cut rates by 50 basis points before Christmas.

If this occurs, Mr Christopher said we can expect house prices to grow between 2 and 14 per cent across Australia. The only exception would be mining towns.

Sydney could expect house price growth of 5 to 9 per cent next year, Melbourne 2 to 5%, Brisbane 3 to 7%, Perth 6 to 12% and Adelaide 2 to 5%.

But the report says this price growth will occur in the lower and middle end of the market while prestige properties continue to underperform.

“At this point in time the prestige market is not showing any signs of recovery at all,” Mr Christopher said.He said the predictions in the report could be bad news for buyers who have waited on the sidelines for house price falls in the order of 40 per cent as predicted by Dr Steve Keen, colloquially known as Dr Doom.