Melbourne Real Estate prices could rise by up to 40% over the next 5 years according to BIS Shrapnel director and chief economist Frank Gelber. The reason is simple; we are not creating enough new homes to cope with the surging population that is flowing on to the city and state.
It seems the same situation is prevalent across the entire country; underlying demand in NSW is to build 50,000 houses annually however the real figure is 30,000. Victoria is in a slightly better position with underlying demand at 46,000 yet still not meeting demand with only 38,000 new dwellings being built.
Dr Gelber from BIS Shrapnel has made a fantastic solution in my opinion, he has pointed to the need to re zone industrial sites in our inner city areas to convert to residential housing.
Looking around our city in areas such as North Melbourne, Brunswick, West Melbourne, South Melbourne and Richmond and many sites exist that are Industrial Zone 3 which means that development for residential purposes cannot take place.
I know a number of single fronted homes that have a similar zoning, often banks will not give the prospective buyer a mortgage unless they have a 20% deposit rather than the standard 10%.
Views do differ on the future state of the market with Westpac chief economist Bill Evans predicting a fall in house prices across the country of 12% suggesting we would then be back at long term trends.
I wonder whether long term trends really matter overall in the long run, many people have suggested for the last decade that our housing prices are over inflated but I think it depends on ones interpretation. If you’ve been use to buying property at a certain price and that does change rapidly, then the tendency is to say that something is too expensive.
If you take into consideration the country’s strong economic outlook and population boom over the next decade, the question is if you don’t buy a property now will you be looking back in 10 years time and think, opportunity missed?
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