SYDNEY, Brisbane, Perth and Darwin are expected to have the strongest house price growth of all major cities in the next three years, with capital gains of more than 15 per cent predicted. The worst performer is expected to be Melbourne, where house prices are tipped to grow only 6 per cent by 2014, says property forecaster BIS Shrapnel.
QBE ImiHousing Outlook 2011 to 2014, a report undertaken by BIS Shrapnel for mortgage insurer QBE, attributes slow price growth in Melbourne to record numbers of new dwellings. The predictions also come after the Victorian capital's housing market outperformed the rest of the country in the 18 months to June last year, with capital gains of 25 per cent.
Prices in Perth and Sydney were expected to grow 20 per cent and 19 per cent respectively in the next three years, while in Darwin prices would rise 17 per cent and in Brisbane 16 per cent.
In Adelaide, Hobart and Canberra, house price growth of between 6 and 8 per cent was expected over three years.
The report said house price gains in the nation's state capitals would be supported by a shortage of residential buildings, a strong Australian economy and stable interest rates.
"Most markets remain undersupplied or at best balanced," BIS Shrapnel managing director Robert Mellor said.
A greater number of first-home buyers and investors were expected to re-enter the market next year with a stronger economic outlook and with housing becoming more affordable, the report said.
BIS Shrapnel believed interest rates will remain stable well into next year. There was a possibility that the Reserve Bank of Australia could cut cash rates before the end of the year, prompting further demand in the housing market.
The latest predictions follow weaker price growth in the past two years, with weaker economic conditions and employment and a higher cost of borrowing.
"People have been sitting on their hands and investors have become more cautious," Mr Mellor said.
"The top end of the market will do it fairly tough for the next 12 months."
QBE Lenders' Mortgage Insurance chief executive Ian Graham said loan defaults had recently increased from a low base.
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