The Biking Broker Newsletter - 15th August 2009

Housing Prices set to Rise – Expert

It seems this news, coupled with federal government incentives, has been heeded by hoards of first timers – with a 90 per cent spike in first homebuyers. But what will happen when the First Home Owners Grant returns to its established point in October?

In an interview with Peter Switzer, Rob Mellor from BIS Shrapnel denies the popularly held belief that once the boost drops, prices will follow. He tips that the modest growth of the last four months was not simply a passing trend, citing positive signs that it will continue even once the incentives expire.

‘Compared to six months or nine months ago, people are probably taking a big sigh, saying, “gee, it wasn’t as bad as we expected”. Property prices haven’t fallen through the floor, they’ve stabilised. We’ve even seen some modest prices growth in the last three to four months, and I think there are positive signs that that’s going to continue beyond even the end of this calendar year when this first homebuyers scheme ends. We’ll just see modest price growth across the board probably through to the middle of next year and possibly beyond that.’

Mellor predicts a rise in growth of above five per cent for 2010-2011, and up to a 10 per cent rate in the next two or three years time, particularly in the Sydney market.

While Mellor acknowledges some odd markets in Queensland and Western Australia where mining investments might have been cut back could suffer price declines thanks to dwindling populations, ‘with the exception of those, really in the major capital cities, the likelihood of prices declining now are really fairly minimal.’

He continues: ‘We are through the worst. The next disaster that we’ll be worried about is really high interest rates somewhere down the track.’

Federal government incentives have been heeded by hoards of first timers – with a 90 per cent spike in first homebuyers. But what will happen when the First Home Owners Grant returns to its established point in October?

Mellor denies the popularly held belief that once the boost drops, prices will follow. He tips that the modest growth of the last four months was not simply a passing trend, citing positive signs it will continue even once the incentives expire.

‘It’s not just additional funding,’ says Mellor. ‘It’s also low interest rates, the lowest interest rates in 40 years. Interest rates are not going to go up tomorrow.’

Mellor says they may rise in the second half of next year, at the earliest.

‘There’s still going to be significant numbers of first homebuyers in the market this time next year Compared to what we’ve had in the last five years or so, these are very strong numbers.’