Australian home prices to rise 8-10 pct in 2010 -APM

Published: 27 Jan 2010 18:22:37 PST

SYDNEY, Jan 28 - Australian home prices could rise by 8 to 10 percent in 2010 as homeowners upgrade their properties, the population grows and new home building lags, research firm Australian Property Monitors (APM) said on Thursday.

Price growth is likely to be fuelled by the top end of the market, which continues to rebound from the global financial crisis, while price growth at the lower end will slow, APM economist Matthew Bell said.

"It would've been a lot of people who sold into the relatively strong first-time home buyer market and maybe move into the next price bracket. So I think upgraders and investors will become a bigger part of the market as 2010 goes on," Bell said.

"You've got still the normal factors of very strong population growth and relatively weak building of new houses and units," he added.

In 2009, Australian median home prices rose 12.1 percent, the strongest growth since 2003. Melbourne recorded the biggest jump among the major cities, rising 18.5 percent while Adelaide posted the smallest gain of 2.4 percent.

The housing market has been supported by the strong Australian economy with a pick up in employment and retail sales.

The Reserve Bank of Australia has already lifted its key cash rate 75 basis points to 3.75 percent since October and the market expects another hike to 4 percent next week.

Still, Bell said he has not seen any speculative moves in the market.

"I haven't heard anything about speculative buying and flipping properties. I think we are still early in the cycle to be there," he said.

According to an international housing affordability survey released this month by U.S. research firm Demographia, Sydney is one of the world's most expensive cities, ranking second only to Vancouver, Canada, on a list of severely unaffordable housing markets.