Residential property prices in Australia are set for wide variations over the next year…

Brisbane, Melbourne, Adelaide and Canberra expected to show a modest pick-up in growth, according to industry analyst and economic forecaster, BIS Shrapnel.

At the other end of the spectrum, price growth in the Perth and Darwin markets will begin to pull back as affordability has become a serious issue. Despite a deterioration of affordability across the board, low unemployment and strong wages growth have meant that any serious shake out in prices has not occurred, according to BIS Shrapnel's Residential Property Prospects, 2007 to 2010 report.

The report highlights the strongest growth over the three years to 2010 is likely to occur in Brisbane, underpinned by:

• Strong underlying demand.
  
  
• More attractive affordability.
  
  
• Strong economic conditions.
  
  
• Low vacancy rates.
  
  
• Solid rental growth.

Upturn in Sydney ‘delayed’

Moderate price growth is expected to continue in Melbourne, Adelaide and Canberra where prices are forecast to move roughly in line with wages growth, while the upturn will be delayed in Sydney as high prices continue to impact on affordability.

House price growth will be modest in Hobart, while Perth and Darwin will be affected by an easing of the resources boom exacerbating the recent deterioration of affordability, according to BIS Shrapnel. "Economic growth has continued to be solid in 2006/07, with jobs growth remaining very strong," said BIS Shrapnel senior project manager and report author, Angie Zigomanis.

"High growth in employment is improving household confidence towards investment in residential property. At the same time, demand for housing is being boosted by high overseas migration, so demand for rental properties is rising strongly. Subsequent growth in rentals and improvement in yields will begin to drive some growth in investor demand."

Source: BIS Shrapnel