Housing market poised for growth: BIS Shrapnel

According to BIS Shrapnel, rising unemployment and the expiry of the increased First Home Owners Grant (FHOG) will not affect strong growth in first home buyer sector.

Brokers can also expect to see strong growth in investment activity.

Speaking yesterday at BIS Shrapnel’s Sydney business forecast conference, Jason Anderson, BIS Shrapnel senior economist, said that the fundamentals are in place for an overall upswing in the property market.

Severe under supply, rising demand and sustained low interest rates would spark an upswing in construction towards the end of the year, he said.

“Unemployment could rise a lot further than the 7 per cent mark and we’ll still have a strong housing market,’ he said.

The faltering economy and rising unemployment would not impact this growth; “if anything it would stimulate demand as the low interest rate environment would continue”.

Mr Anderson said that first home buyer activity will remain strong and “only a small percentage of first home buyers have been active so far”.

“We can expect to see around 180,000 first home buyers this year”.

First home buyers have recently flooded back into the market following the introduction of beefed-up first home buyer incentives.

ABS data this week showed that 26.5% of all home buyers in January 2009 were first home buyers.

There were around 400,000 25 to 34 year olds currently still living at home, Mr Anderson said, and low interest rates, pent up demand and the relative cost of renting to buying would see demand from this market segment continue.

Increased buying activity among first home buyers will then spur a recovery in other market segments with huge potential for the investment market to fire up.

With sustained low rates and further growth in rental yields forecast investment activity is tipped to be the next growth market, he said.

“Fixed rates of around 5 per cent will bring a huge number of investors out of the woodwork.”