“Sydney is facing an acute housing shortage predominantly in the lower and middle end of the market."

Australian house prices could rise 7% in 2013 if eurozone holds together: SQM Research

By Larry Schlesinger
Wednesday, 26 September 2012

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Capital city property prices are forecast to rise by between 4% and 7% in 2013, with Sydney, Darwin and Perth expected to be the strongest performers under favourable economic factors, according to the 2012 SQM Research Boom and Bust Report.

Double-digit house price growth is in the upper range of forecasts for Perth (12%) and Darwin (14%), with Sydney just under (9%) under a base-case scenario of terms of trade falling but then stabilising; the cash rate falling by 50 basis points; and the Australian dollar hovering at parity against the US dollar.

Even under an unlikely worst-case "wild card" scenario of a break-up of the eurozone, terms of trade crashing, banks rationing credit and the RBA forced to cut rates by 150 basis, the impact on property prices would be small, with SQM Research forecasting a maximum 3% fall in house prices.

The Perth and Adelaide housing markets would suffer the most pain under such a scenario, with SQM Research forecasting as much as a 5% fall in Perth dwelling prices, with 4% maximum falls in Brisbane and Melbourne.

City	% change from peak to June 2012	2012 to date	2012 Forecast	2013F Scenario 1 (base case) TOT falls then stabilises RBA cuts by 50bp AUD hovers at parity	2013F Worst-case scenario Euro break-up Banks ration credit RBA cuts by 150 basis points
Perth	-5.8% (Mar 2010)	+1.2%	+1% to +5%	+6% to +12%	-5% to -3%
Brisbane	-6.9% (June 2010)	Steady	-1% to +3%	+3% to +7%	-4% to -1%
Darwin	New High (June 2012)	+9.7%	+7% to +13%	+6% to +14%	+2% to +5%
Melbourne	-7.5% (June 2010)	-1.6%	-3% to +2%	+2% to +5%	-4% to 0%
Sydney	-1.5% (June 2010)	+2.2%	+3% to +5%	+5% to +9%	-1% to +3%
Adelaide	-5.1% (Dec 2010)	-0.6%	-3% to +2%	+2% to +5%	-5% to -3%
Hobart	-7.2% (Dec 2010)	-2.4%	-5% to 0%	+2% to +5%	-2% to +2%
Canberra	-2.8% (Dec 2010)	-1.0%	-2% to 0%	+1% to +4%	-3% to 0%
Capital city Average	-4.7% (June 2010)	+0.3%	0% to +3%	+4% to +7%	-3% to 0%

SQM Research managing director Louis Christopher tells Property Observer that Sydney remains the “blue chip of real estate markets”

“It’s a deep and safe market."

However, he says Sydney is very much a two-speed market, with the outer-ring suburbs expected to outperform but no recovery in sight for the prestige market, which could fall further in 2013.

“Sydney is facing an acute housing shortage predominantly in the lower and middle end of the market. In the past, the city benefited from the booming financial sector, however, the GFC has had a direct impact on the sector and ultimately the housing market in the city,” says the Boom and Bust report.

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