My old academic mate Steve Keen might have predicted a 40 per cent fall in real estate prices but one of the country’s most respected property economists can’t see it on his crystal ball.
Rob Mellor, who for as long as I have been a business commentator has been ‘counting houses’ for the statistics business BIS Shrapnel, which in turn has monitored the building game for decades, has a very positive outlook for our precious property assets.
And for share players, he also suggested that a construction boom was in trail and that should help the big building names on the ASX such as Boral, CSR and others.
“Compared to what some people thought six or nine months ago, people might be taking a big sigh and saying ‘gee, it wasn’t as bad a we expected’,” he told me on SWITZER on Sky News Business Channel. “Property prices have not fallen through the floor, they have stabilised quite clearly just about around all of Australia other than the top-end of the market and we’ve seen some modest price growth in the last three or four months.”
He sees positive signs emerging and is not worried that it will all change when the First Home Buyer’s Grant (FHBG) starts to be reduced after October.
Price growth points
And hold on to your hats, as Mellor thinks price growth will re-emerge. This is what he believes will happen:
“We are through the worst,” he advised. “The next disaster to worry about will be higher interest rates down the track.”
Looking around the country, this is what Mellor expects city by city:
Sydney is tipped to be rising by seven to eight per cent per annum in two years from now and might peak around 10 per cent growth. Over four to five years there could be 35 per cent growth! This is a very under-supplied market given its stock of properties and the population growth as well as tightest vacancy rates in the country. Mellor says you have to wonder where all of these people are living!
The big tip from BIS Shrapnel is that a construction boom is on the way and the history of economies shows that a building boom is a great base for creating an economic recovery.
Interest rates on hold?
Mellor isn’t worried about the change to the FHOG because, he says, low interest rates also explain the surge in first homebuyers and he doesn’t think rates will rise until the second-half of next year.
All I can say is — I hope he is right and my old mate Steve is terribly wrong.
For advice you can trust, contact Switzer Financial Services.
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