House prices in Sydney may have finally bottomed out after consistent quarterly declines since March 2004, according to the September 2006 PMI Residential Property Overview Quarterly Update.
At the same time, the report which was prepared by leading forecasters BIS Shrapnel, found that price growth in Perth and Darwin have continued to enjoy strong growth – supported by strong economic growth thanks to a booming resources sector.
According to the report, assuming the continuation of positive conditions, price increases in Perth and Darwin are expected to remain solid for the remainder of 2006 and into early 2007.
Meanwhile, after a pause during 2005, the report found that the market in Brisbane has recorded some slight improvement, underpinned by buoyant economic conditions and improved confidence.
The other east coast cities were not as fortunate as Brisbane, the report found little change is expected in prices in Sydney, Melbourne, Adelaide, Canberra, and Hobart as further interest rate rises are predicted to offset any benefits gained from wage rises.
According to the report, the lower price growth of the past two years or declines in the case of Melbourne and Canberra in 2004/05 and Sydney in 2004/05 and 2005/06, indicates that affordability has reached its upper limit, with little potential for future substantial gains in the short term.
Nationally, total loans to owner occupiers increased by over 11% in 2005/2006, with a more significant pick up in loan activity for established dwellings than for new dwellings.
Loans to first home buyers also on the increase, it appears the first home buyers who are entering the market are electing to take up apartments rather than house/land packages – most likely for affordability reasons.
PMI’s chief executive Ian Graham said it is important that first home buyers continue to enter the market, with lenders offering attractive home ownership products to borrowers who are capable of servicing these loans.
“This will underpin a longer term recovery in the housing market.” he added.
BIS Shrapnel’s director of building and construction Rob Mellor said nationally, loans to first home buyers increased by 24% in 2005/06.
He said this recovery likely reflects the return of first home buyers now that the rapid price growth of previous years has tapered off, as well as the introduction of additional state government incentives to first home buyers from 2004/05.
“Further growth in first home buyer activity in 2006/07 is likely to be more modest across all states,” Mellor concluded.
By Adam Parsons
