House prices to rise 10% this year as part of upward trend: Koukoulas

By Larry Schlesinger
Friday, 01 February 2013

The latest housing data has confirmed News Limited economist Stephen Koukoulas’s belief that house prices will rise around 10% in 2013.

Adding to this data, Koukoulas believes that a trifecta of factors - low interest rates, high immigration and improved affordability – make such a price rise
"close to certain”.

Speaking on the ABC's Inside Business yesterday, Koukoulas said he thought house prices were set for a strong up trend.

"We have had a bigger improvement in affordability in the last two to three years following what was clearly excessive house price growth up until the last few years.

"We have about 12% wages growth, house prices are about 5% off their peak and interest rates are very low, so affordability has improved dramatically," he says.

Helped by growing migration and a lack of houses being built in the past, he expects housing to do "particularly well".

January housing data released by RP Data has house prices up 1.2% over January with all the major capital cities recording gains over the month, led by Brisbane, Perth and Sydney.

Also last week, The Housing Industry Association’s reported new home sales rose 6.2% in December after rising 3% in November and 3.6% in October.

“That is a thumping 13% lift in sales in the final three months of 2012, an impressive lift after home sales were in the doldrums around the middle of last year,” said Koukoulas in his latest column for Business Spectator.

Other signs that housing is on track for double-digit growth in 2013, says Koukoulas is home building approvals (indicators of future construction) are lifting.

“From the low in April 2012, the number of approvals has lifted more than 20% which points to the housing making a decent contribution to GDP growth, he said.

Koukoulas also points out that the share price in companies related to the home building industry “have skyrocketed in recent times” including building materials provider Boral up 60% since the middle of 2012 and commercial property developer Leighton Holdings up nearly 50% over the same period.

“The housing sector is set for a strong performance in 2013.

“There are likely to be strong rising house prices, higher home sales and a lift in construction," he says.