A strong stock market and more government spending will help bolster the prestige market in 2013, a leading economist has predicted.
According to Australian Property Monitors (APM) senior economist Dr Andrew Wilson, the prestige market is set to pick up in 2013.
“One of the drivers of the prestige market is the stock market and it is a good precursor for what happens,” he told Real Estate Business.
“We have seen strong movement in the stock market through December and into January. We are starting to see measures in the stock market that we haven’t seen for two to three years.”
The extra wealth created by a booming stock market should, in turn, give people the cash to buy prestige properties.
“In two years time I think we will start to see much more confidence in the upper end of the housing market," he said. “We will see a three to five per cent increase in Sydney driven by more activity in the prestige market, which looks to have bottomed out after a very quiet two-year period.
“Melbourne should continue to move relatively sideways and the momentum of the prestige market should continue.”
Across the broader property market, the biggest winners in 2013 will be Perth and Darwin, according to Dr Wilson.
“In Perth we are seeing a surge in population and people have to live somewhere - rents are rising strongly and there is a shortage of housing,” he said.
“We have already started to track upwards of five per cent growth last year in Perth and I think that will continue in 2013. Perth is still below its previous house price peaks so it still has that capacity for more growth.
“There is a similar situation in Darwin.”
The recent admission by the federal government that they will no longer be able to make a budget surplus should help the property market, Dr Wilson added.
“This can be a positive because we won’t have a tightened fiscal policy as they try to meet surplus,” he explained. “This has tended to offset the loosening of monetary policy by the RBA with low interest rates.”