RESIDENTIAL PROPERTY PRICE FORECASTS

Over recent quarters, we have heard a number of doomsayers predict that the price for typical Australian residential properties will show dramatic falls, similar to what has occurred in the US. 

We have consistently rejected this view because Australia’s economic fundamentals, and financial underpinnings, are completely different to those in the US - see February report http://www.compasscapital.com.au/report31-2009-02-Austn%20and%20US%20housing%20markets.html .

In particular, Australia has huge undersupply of residential dwellings and strong population growth, compared to the US, where there is huge oversupply and much lower population growth.

Instead, we have been highlighting the opportunity to acquire property which can provide both sound medium term capital gains, and good rental returns, during a market where uncertainty is created by those talking down residential property and the Australian economy in general.

Recent evidence is that dwelling prices are rising (except in Perth).  For example, RP Data Rismark shows the following dwelling price movements over the four months to end April:

Darwin:  +5%
Melbourne:  +4%
Sydney:  +4%
Brisbane:  +2%
Canberra:  +1%
Adelaide:  +1%
Perth:  -1%

Positive forecasts are now emerging from experienced professional property forecasters, who have been forecasting for years (in contrast to some recent doomsayers that have emerged from relative obscurity to grab headlines).  Set out below are recent 3 year forecasts from two highly respected property specialists – Residex and BIS Shrapnel

While there is variation in the forecasts across regions, both groups forecast significant positive returns over the next three years.  This is consistent with history, that shows that residential property has performed well (in fact often better than these forecasts suggest) after both equity market crashes and recessions - see April report  http://www.compasscapital.com.au/report29-2009-04.html

As well as forecasts of attractive capital growth, there are also prospects of good rental returns because of the huge under-supply of dwellings in Australia, which are forecast to continue for many years -see May report http://www.compasscapital.com.au/report32-2009-05.html

Of course, the capital growth forecasts are average returns across very large numbers of dwellings.  Within these broad regions, some sub-regions will underperform, and others will outperform.  And within each sub-region, some types of property will underperform and others will outperform.

If you have interest in our views of properties that are likely to perform well over the medium term, please register interest and we will be in contact.