Weak economy can’t hold back house prices

Five of Australia’s capital cities will enjoy higher capital gains this year than last year, new forecasts have revealed.

Sydney’s median house price is forecast to grow 8.0 per cent during 2015, following 14.0 per cent growth last year, according to Domain Group.

Brisbane has been tipped to outperform Melbourne with 6.0 per cent growth after posting a rise of 5.9 per cent in 2014.

Melbourne price growth is forecast to decline from 4.1 per cent in 2014 to 4.0 per cent in 2015. Adelaide is also expected to decline, from 4.6 per cent to 4.0 per cent.

However, Domain Group has forecast median house price increases for Australia’s other four capitals.

Hobart prices are predicted to climb from 2.1 per cent to 4.0 per cent, while Perth prices are predicted to rise from 0.6 per cent to 2.0 per cent.

Canberra is expected to rise from 0.9 per cent to 2.0 per cent, while Darwin is expected to go from negative growth of 2.5 per cent to positive growth of 2.0 per cent.

Domain Group senior economist Andrew Wilson said capital city housing markets have generally had a good start to 2015, despite the underperformance of most local economies.

“The February cut in interest rates, although not providing significant improvement to affordability, has nonetheless impacted buyer confidence and reinforced underlying market dynamics,” Dr Wilson said.

He said record low interest rates in 2015 were likely to be offset by weakening economic activity, particularly rising unemployment.

“Sub-market activity will remain mixed, with growth prospects in the mid- to higher-priced brackets continuing to be the strongest performers of most local markets overall.

“The prestige market, which has been relatively subdued over recent years, should benefit from a rising stock market to finally regain its previous peak levels of 2007.”

[Video: Auctions becoming increasingly popular, says Dr Wilson]

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