Housing Prices Tipped to Grow by as Much as 20% 

A QBE Housing Outlook 2010-2013 survey compiled by BIS Shrapnel predicts that housing could grow by as much as 20% in some capital cities over the next three years. When thought of on an annual basis, the anticipated increase represents steady and realistic growth, as opposed to the double-digit annual percentages had during the boom times.

"Price growth is forecast to be strongest over the next three years in Perth, Sydney and Adelaide - all experiencing forecast rises of around 20 per cent in median house prices," the report states.

The report predicts that the strongest growth will be in Perth, with 3.1% growth in 2011, 7.9% growth in 2012 and 8.3% growth in 2013. Sydney and Adelaide are expected to follow closely while other states and territories are predicted to have more modest growth, with 15% in Brisbane, 13% in Hobart and Melbourne anticipated to be the weakest market with 9% growth over the next three years.

Australia is one of the only developed economies in the world to have come out of the global financial crisis relatively unscathed. This, coupled with low unemployment, good income growth and strong migration are factors supporting the housing growth predictions.

Growth in house prices however is expected to peak in 2012 – 2013 as economic growth also reaches its peak and interest rates start to bite.

"This will ultimately have a slowing effect on the economy and prices, although there may be one last gasp for price growth in some cities in 2012-13 where there is a large deficiency, or affordability is not strained," the report says.

BIS Shrapnel expects a return of first home buyers next year, while the biggest risk to growth will be affordability issues.