Aussie property about to ride a big wave

By Anthony Keane, News Limited newspapers, 26 July 2009

Australia's property sector is about to catch a wave but homeowners and investors do not need to worry about a wipe-out.

While a bubble in the first home owner segment of the housing market is set to burst with the winding back of government grants in two months, industry experts say investors will fill the breach.

They don't expect the property market to follow the big slumps felt in Britain and the US, where prices have fallen by more than 20 per cent.

"Fundamentally, America has 1.1 million properties in oversupply," says Damon Nagel, the managing director of property investment company Ironfish.

"In Australia, it’s more than 180,000 in undersupply. We can keep building for 18 months and only catch up to demand."

But the buyers of property are expected to increasingly be investors, rather than owner occupiers, once the Federal Government First Home Owner Grant starts to wind down from September 30.

"I think you’ll find first home buyers next year will be like rocking horse droppings – few and far between," Nagel says.

Professionals Real Estate Group agency principal Claudine Deneuve says buyer inquiries have risen as people realise interest rates are unlikely to fall further.

She’s expecting investors to return to the market as first home owner activity falls in coming months.

A report released last month by forecaster BIS Shrapnel says conditions are ripe for a sustained recovery in residential property prices.

"Low interest rates, solid growth in rents and housing shortages are evident in most markets," the report says.

Joe Siriani, executive director of mortgage broking group Smartline, says he does not think prices will drop while houses are still in short supply.

"Demand stems from population growth," he says. "With 190,000 migrants coming into Australia, there’s a shortage of housing, and people need accommodation."

He reckons now is a ‘‘once-in-a-generation opportunity" for investors. "It’s probably a good time to buy in the right spot, but be careful,’’ Siriani says.