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Despite strong signals that the Australian residential market is in the early stages of recovery, a new report suggests the next period of property price growth will be more modest than experienced previously.
The latest Residential MarketView report from CBRE suggests the market is ready to move into a growth cycle, shifting from the period of decline over the last three years.
“A low interest rate environment, modest improvement in building approvals, an increase in population growth, improving rental yields, expanding buyer enquiry levels, sales volumes improving and recent equity market growth are all necessary for a market geared towards recovery,” said CBRE’s regional director of residential valuations, Tom Edwards.
However, capital growth over the short to medium term is being capped by the market’s conservative outlook.
“Households will remain focused on debt reduction rather than expanding property holdings, which would drive stronger capital growth,” Mr Edwards said.
Sam Reilly from CBRE’s global research and consulting team said a long period of relatively low building activity in Sydney is over, with approvals showing upward growth.
“Current residential building activity in Sydney is gradually increasing from the subdued conditions experienced during and after the GFC," he said.
“This is partly in response to stable economic conditions but also as a result of supply shortage that was difficult to rectify due to a challenging planning regime and problems associated with obtaining credit.”
Buyer activity has also improved in south east Queensland, despite the challenges that have been posed by recent flooding and other natural disasters.
“Despite this improvement, indications of capital growth remain largely absent, although the lower price brackets in SE Queensland markets are reporting better levels of buyer enquiry and increased levels of stock shortages as demand improves,” Mr Reilly said.
Perth’s tight vacancy rate, amongst the lowest across the country, is also relevant with resource related spending assisting to boost population growth and pressure supply levels.
“This is a relatively strong contrast to most other residential markets across Australia where employment outlooks are subdued,” Mr Edwards said.
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