House prices set to rise
Economic forecaster BIS Shrapnel predicts house prices will rise as much as 40% across the nation in the next five years, because of a growing shortage in housing.
The firm’s chief economist Frank Gelber says housing affordability is already at record lows but will go even lower because demand is much higher than supply. Underlying demand is 182,000 new dwellings per year but only 150,000 are being built.
NSW has the biggest shortfall, but Victoria is only slightly better.
Gelber’s says there will be a national shortfall of 60,000 dwellings by June and 129,000 by mid-2009. We need to build more houses, he says.
Rising interest rates are compounding the problem by discouraging new home construction.
When interest rates stop rising or eventually start to fall, it’s likely there will be a surge in demand for housing that could result in a price explosion, Gelber says
.