Low interest rates expected to boost residential property investment in Perth, Darwin, Sydney: APM predicts

Residential property prices in Perth and Darwin could rise as much as 7% next year, but little optimism is held by Australian Property Monitors’ senior economist, Dr Andrew Wilson for Melbourne, Adelaide and Hobart.

Record immigration levels, housing shortages and rising rents will boost Perth’s potential, APM suggests.

APM expects the best capital growth to be in Darwin and Perth in 2013, with Wilson saying Sydney and Brisbane also look good leading into 2013.

He expects price growth between 3 and 5% for both cities.

“APM expects investors will continue to be active in 2013 increasingly attracted to bricks and mortar investment by historically low interest rates and the prospects of capital gains – particularly focused on Sydney, Perth and Brisbane.

“Overall markets have stepped forward modestly into recovery in 2012, with the prospect of this trend continuing in most capital cities,” Wilson says.

Sydney’s inner-west, Canterbury-Bankstown and Hills suburban areas were tipped as areas to watch.

Despite Brisbane’s economy underperforming, prices there have stabilised and should improve. The apartment market should also perform well next year.

But capitals such as Melbourne, Adelaide and Hobart are expected to remain flat with little price growth.

Dr Wilson said markets would continue to be driven largely by localised factors such as job security concerns, cost of living pressures and state and federal government fiscal policies.

While local economic factors may constrain Melbourne’s middle market, APM expects the prestige market to continue building solid buyer momentum.

“[The year] 2013 should continue to build on the modest gains of the past year. However, the forthcoming federal election and the likelihood of a protracted campaign may result in some uncertainty amongst home buyers and sellers, with confidence already low,” he said.

APM says 2012 had been a positive year for the Australian housing market following a generally subdued period of buyer activity in 2011.

The national median house price rose by just under one percent over the 10 months to October 2012.

“Although the housing market performance in 2012 has been generally positive, results have nonetheless been mixed and patchy, with buyer and seller confidence remaining fragile.

“Capital city markets have responded mainly to local demand and supply drivers although the reduction in official interest rates from 4.75 percent in November 2011 to 3 percent in December 2012 has improved housing affordability and contributed to higher levels of buyer confidence.

“The cut in mortgage interest rates has however been offset by significant rises in the cost of living driven particularly by tight state and national government fiscal policies and increased energy costs,” Wilson says.

“2013 should continue to build on the modest gains of 2013 however much will depend on the performance of the national and local economies.

“The December cut in interest rates to the lowest level on record should help get the market off to a good start to the year,” Wilson says.

This article first appeared on Property Observer.