House prices in Melbourne and Sydney are tipped to rise because of the limited availability of land, steady poplulation growth, and strong demand from international investors.
Developers are arguing that consumers will be forced to pay over the odds as the availability of land shrinks at the same heady rate as demand for new homes increases. The issue of limited supply and lack of product being built has reached danger proportions, forcing some developers to close down. In Victoria, the ratio is 1.5 dwelling approvals for every 2.3 person increase in population.
Managing director of MLG in New South Wales Chris Freeman said ”As long as returns are evident for investors, which they certainly appear to be at the moment, prices look to only be heading one way. And with finance approvals for investors up almost 30 per cent over the year in NSW, it looks sure to continue.”
MLG is expecting added pricing pressure with stronger international sales as changes to Foreign Investment Review Board criteria start to have an impact. According to MLG chief executive Marcus Gilmore, overseas interest in Australian property was exceptionally strong as foreign investors recognised the extent of the demand-and-supply dynamic.
”Last week we presented to a major property conference in Kuala Lumpur and were swamped with inquiry. The only thing limiting the level of sales from Asia is finance restrictions, but this is likely to change and this buyer group will be an increasing force over coming years,” Mr Gilmore said.