An economic forecaster projects solid growth across the housing market over the coming years on the back of residential stock deficiency.
At BIS Shrapnel’s March Business Forecasting Conference, the research house predicted a 15 per cent growth over the next three years, but says the recovery will not be shared equally across the states.
Frank Gelber, BIS Shrapnel’s chief economist, said there will continue to be solid growth, dispelling claims that housing values will decline.
“In the last few years, we’ve heard these turkeys say there’s going to be a 40 per cent decline in housing prices because our housing prices are out of line with overseas norms in terms of how many years it takes to buy a house,” Mr Gelber said.
“Well, that’s not the way the housing market works.”
While the growth is not going to double like it has in the past, he continued, it will be slow and steady, and will be enough to bring the investors back.
“An upswing doesn’t come from one minute to the next, [where] you go from bust to boom, it’s a slow build-up of momentum and the shift in psychology," he said.
However, to attract more investors into the market, a higher yield needs to be on offer.
“[This] means that rents have to rise a lot more, and of course, that’s been what’s happening,” Mr Gelber said.
“The deficiency of stock in Sydney has been driving up rents quite strongly, hence improving yields of houses.”
He stressed there needs to be more building in states where there is an undersupply, however, adding that it’s the deficiency in stock that is driving the upswing of the housing markets.
According to BIS Shrapnel and Australian Bureau of Statistics data, the forecast dwelling stock deficiency at the end of this financial year is 80,800, and is most severely felt by NSW.
In contrast, there is a surplus of stock in Victoria, South Australia, Tasmania and Australian Capital Territory, Mr Gelber said, meaning these places will miss this cycle of growth.
However, these states too will eventually make a comeback.
“These are not huge oversupplies, they’re moderate oversupplies. So once they’ve missed this cycle, they’ll probably lead the next cycle,” Mr Gelber explained.