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Residential property to appreciate in 2015

Property research house Future Estate has predicted a rise in local residential property prices over the remainder of 2015.

The rationale behind Future Estate’s expectation is the slow economic growth conditions the Australian economy is currently experiencing. “The Reserve Bank of Australia (RBA) responded by cutting the cash rate from 2.5 per cent to 2.25 per cent [in February], the lowest on record,” the researcher said.

“The RBA reduced its forecast average expansion for the year to between 1.75 per cent and 2.75 per cent from between 2 per cent and 3 per cent estimated in November, with market observers expecting rates to be further cut in the coming months.”

On the back of the central bank’s action, Future Estate said it envisaged investors and first homebuyers would take advantage of the attractive borrowing rates to further invest in residential property, in turn driving prices upward.

In regard to individual capital cities, the research house said it believed Sydney would continue to be the market providing the strongest capital growth throughout the year.

“Over 2014, Sydney’s median house price increased by 14.1 per cent, just below the 2013 result of 15.4 per cent. Sydney continues to experience the strongest market conditions since 2003 and we expect this to continue into 2015,” it said.

“Melbourne and Adelaide median house and unit prices also experienced modest growth over 2014, with Perth registering negligible growth and Darwin and Hobart experiencing a reduction in median unit prices over the year.”

Rental yields were also set to strengthen in 2015, it said.

“Strong underlying demand is set to continue to outstrip supply and put upward pressure on rents. We believe this is set to continue through 2015, particularly in the robust Sydney market,” it said.

It did note the rate of rental growth could be dampened in Melbourne and Brisbane due to the supply of new units, which would provide rental tenants with more choice.

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