property time to explode

House prices tipped to surge in 2007

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February 21, 2007 - 8:04PM
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House prices were likely to surge this year after shrugging off the effects of the drought and concerns over infrastructure, an independent property analyst says.

Michael Matusik said the residential market had started with a bang in 2007, with agents reporting better than expected inquiries, particularly in "seachange" locations.

Auction rates in capital cities and most of the eastern seaboard have exceeded 50 per cent for the first time in years, a figure which usually indicates price growth within three to six months.

"The value of detached houses rose across all capital cities during the calendar year 2006, with prices of units also lifting in all capital cities except Sydney," Mr Matusik said.

A lack of infrastructure delivery, particularly in south-east Queensland and Sydney, the drought and low affordability were putting the brakes on the market in the short-term, he said.

Changes in superannuation laws last year had also had a substantial impact on the residential market, with investors putting their money into superannuation rather than buying investment property.

"This has resulted in a tightening of the rental market and at present too few investment properties being built.

"But we anticipate that some of this super money will come back into the residential market from July this year."

Mr Matusik said talk of a rise in the first home buyer's grant after the federal election later this year would also have a positive impact on the market.

But the added incentive of an increase in the first home buyers' grant was likely to dry up demand for residential property in the middle of 2007.

"The flood gates will likely open up after the election, causing demand to outstrip supply, causing a mini boom of eight to 10 per cent rise in values and an unnecessary market correction in late 2008," he said.