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Sydney house prices to jump 20pc in next two years, says BIS Shrapnel

23 Mar 2015 -

Sydney house prices will rise 20 per cent over the next two years, pushing the median house price well above $1 million by June 2017, according to the latest forecasts from economic researchers BIS Shrapnel.

It is forecasting a 17 per cent rise in Sydney house prices in the current financial year (prices are already up 14 per cent for the year to March according to CoreLogic RP Data) followed by rises of 13 per cent and seven percent over the next 24 months.

Pent up demand, a push by investors into the market and an undersupply of new housing stock will drive the price surge in Sydney, pushing the market further out of reach of first-home buyers and driving up rents. Similar market dynamics

Similar market dynamics will drive a 14 per cent surge in Brisbane house prices over the next to years to June 2017, but outside of these two markets the outlook is much weaker.

 In Perth, the weakening mining-led economy will drive drive property prices down three per cent over the next two years to June 2017.

In Melbourne, house prices will barely keep pace with inflation, according to BIS Shrapnel, rising a cumulative five per cent between June 2015 and June 2017, while Adelaide house prices will rise just three per cent.

Beyond 2017, house prices will continue to rise in markets like Sydney and Brisbane, but at a more moderate pace, as higher interest rates impact on demand. House prices will be flat or falling in the other capital cities.

"The residential recovery is picking up pace, but is patchy between the regions," said BIS Shrapnel in its latest Economic Outlook Report. "Sydney has three years to run."

"Our view is that stock deficiencies across major centres of Sydney and southeast Queensland are set to drive residential building higher over the next two years before the cycle runs out of steam."

BIS Shrapnel said high rise apartment building is leading the market and "feeding into strong growth in detached houses". 

"The recent rate reduction by the Reserve Bank will be a positive for the market overall but we don't think it will set the cycle up for an elongated upswing.

 "It will probably only push the peak in commencements a little higher. New dwelling starts are already high and there is limited scope for further growth in certain markets.

"For many prospective borrowers the decision on whether to enter the property market or not has already been made, and an additional 0.25 per cent off their mortgage will not be enough to change their behaviour.

"It will probably encourage some purchasers around the fringes, providing a mild boost to the market."

Above is an abstract from http://www.afr.com/real-estate/residential/nsw/sydney-house-prices-to-jump-20pc-in-next-two-years-says-bis-shrapnel-20150317-1m0tdg

Caroline He

4C Realty