Latest NewsHouse Prices Set to RiseSunday, 02 April 2017

Australian house prices are expected to climb as much as 20 per cent over the next three years, underpinned by strong economic growth and an ongoing shortage of supply.

The QBE LMI Australian housing outlook report, prepared by BIS Shrapnel, says median house prices in Perth, Sydney and Adelaide are expected to jump by about 20 per cent to June 2013.

By the June quarter of 2013, Sydney's median price is forecast to hit $750,000, up from $624,000 in the same quarter this year, followed by Darwin ($620,000) and Melbourne ($610,000).

"Future median house price rises will be underpinned by a deficiency of dwelling stock across most capital cities, which in turn will lead to tight vacancy rates and solid rental growth, flowing through to investor demand," QBE LMI chief executive Ian Graham said in a statement.

Mr Graham said first home buyer activity, which had tapered off in the first half of 2010, was also due to pick up next year, returning to long-term averages.

"Demand is forecast to return to more normal levels, believed to be around 130,000 to 140,000 loans approved, in 2011," he said.

BIS Shrapnel managing director Rob Mellor said steady growth was expected throughout the nation but increases of more than 10 per cent in Melbourne could sound alarm bells.

"We've got strong employment growth, fairly strong wages growth - put those two together and that's very strong support for residential demand," Mr Mellor said at the report's release in Sydney.

But he said recent Rismark figures indicated a slight price decline over the September quarter, following recent heady annual double-digit gains in Sydney and Melbourne.

"Price growth pretty clearly has slowed over the last six months," Mr Mellor said.

"We think that's evidence that we'll be struggling to get much more than three or four per cent growth generally over 2010/11 in most capital cities but certainly in the case of Sydney it's probably in the higher end, about four per cent."

In real terms, adjusted for inflation, prices were now down by 12 to 15 per cent from where they were at the peak of the property cycle in 2003, he said.

If nominal growth could average five per cent per annum Australia would doing "pretty well", he said.

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