And, countering some of the comments of Ross Gittins, is the following report, just out (9.47am, RWE) from BIS Shrapnel.
BIS Shrapnel is advising a moderation in behaviour over the coming year, before prices start again increasing (by between 9% -36% over the next 3 years).
For those commentators, however, who are pointing to Melbourne being over-priced, a thought should be spared for Sydney.
Whilst Melbourne prices are expected to be flat in the coming year, according to BIS Shrapnel, prices in Sydney will continue to increase, such that: 1) by 2006, the median property value in Sydney will be $578,000; 2) by 2006, the disparity in median values between Melbourne and Sydney will increase to $196,000, from its current $115,000; 3) in 2006, BIS Shrapnel is predicting a Syndey metro median price of $578,000, vs $382,000 for Melbourne; 4) in 2007, BIS Shrapnel is predicting that median property prices in Sydney will fall by 10%; 5) irrespective of all this, it is Sydney that is fast becoming an impossible city in which ordinary Australian wage earners can buy a property without the $1/2m mortgage price tag; and 6) in the coming years, the relative value benefit of Sydney over Melbourne, or Brisbane, for that matter, will start to fade away.
Sydney, not Melbourne, is fast becoming the London, or New York, of Australia - potentially a good place to work, an icon to the financial sector, but nonetheless, a city where most people cannot afford to live, except by way of renting (or where people cannot afford to move away from their existing homes).
----------------------------------------------------- BIS Shrapnel: Caution emerging in property market 09:47, Wednesday, 2 July 2003
Sydney - Wednesday - July 2: (RWE) - The first signs are emerging of caution in residential property markets, with declining purchases by first home buyers, concerns over the global economy which are creating consumer uncertainties, and increasing residential vacancy rates, says BIS Shrapnel.
But the firm's latest study, Residential Property Prospects, 2003-2006, forecasts only a slowing, not a halt, to the price spirals of recent years.
Prices are expected to increase by between 9 per cent and 36 per cent over the next three years, around the various Australian capital cities.
The study forecasts a further widening in the gap between Sydney and Melbourne residential prices, from the current disparity of $115,000 to $196,000 in 2006.
The median house price in Sydney is forecast to reach a brief peak of $578,000 in 2006, before declining by up to 10 per cent the following year.
The median house price in Hobart in 2006 - the least expensive of the state capitals - is expected to be $170,000.
The percentage increase figures are not adjusted for inflation, which is expected to increase prices by around 10 per cent over the same period.
In real terms, prices are expected to decline marginally in Melbourne and Adelaide.
The joint authors, Director of Building Services Robert Mellor and Angie Zigomanis, Senior Property Analyst, observes that the recent strong price growth has been driven by the increase in net overseas migration, which has substantially strengthened underlying demand in a low interest rate environment.
The market is expected to pause in 2003/04.
First home buyer demand has substantially weakened.
The presence of investors - who accounted for 37 per cent of total residential borrowings in the year to March 2003 - will wane as vacancy rates rise.
However, underlying demand remains strong and will maintain modest price increases.
The dwelling stock deficiencies in Queensland and NSW will rise substantially over the next three years, driving strong price growth in Brisbane and Sydney.
In Sydney house prices have increased by more than 40 per cent over the 18 months to December 2002, driven by high first home buyer activity and increasing underlying demand.
Price increases are expected to have moderated in the six months to June 2003, with the median house price rising to $465,000, representing an annual increase of 20 per cent.
However, rents are showing little improvement in the face of strong capital gains, and investment returns are declining.
Investor demand will soften over 2003/04, along with owner-occupier demand, in the light of an uncertain economy.
However, as the economy strengthens in 2004 and 2005, an increasing stock deficiency will create strong price growth, driven in particular by land supply shortages.
In Melbourne the median house price has increased by 114 per cent between 1996 and 2002, an average of 13.5 per cent annually.
Growth is forecast to have slowed to 7 per cent in 2002/03 to a median price of $350,000 and the stock deficiency has fallen from a peak of 18,600 dwellings in Victoria in 1998 to an estimated 6,700.
Construction is still high, and weakening demand due to an expected return to a net interstate migration outflow from Victoria, will result in a further reduction in stock deficiency, slowing growth in residential values to 2 per cent over 2003/04, before improving slightly in the following two years.
In Brisbane residential prices improved by only 3 per cent in real terms between 1993 and 2001 because of a persistent oversupply.
Prices have subsequently increased substantially and are forecast to have risen by 21 per cent in 2002/03.
The stock surplus has been reversed, and Queensland now has a deficiency of nearly 17,000 dwellings.
Underlying demand has increased due to a stronger inflow from both overseas migration and net interstate migration.
