BRISBANE house prices will rise by as much as 40 per cent ahead of a nationwide residential property boom in three years, according to a leading economic forecaster.

In a bleak message for future home buyers, BIS Shrapnel chief economist Frank Gelber said present prices were as affordable as housing was going to get. Dr Gelber predicted a further two, possibly three, interest rate rises over the next 12 months, which would keep the lid on housing supply.

But with demand bubbling away due to a continuing shortfall in the construction of new dwellings, an "upswing was coming . . . as soon as the lid is off the pressure cooker". "There's a housing boom coming, is what I'm really saying," Dr Gelber told yesterday's BIS Shrapnel Economic Outlook conference in Brisbane.

Housing supply limited It was a boom that interest rate rises or even a recession would only delay, he said. Only higher prices would entice developers – whose returns are already crimped by substantial government infrastructure charges – to invest in new housing stock. "(Governments are) charging $150,000 to 170,000 per residential lot on the extremities of the city (so) it's going to cost (developers) $300,000 to turn on the lot," Dr Gelber said. "It's going to take something like a 30 to 40 per cent rise in housing prices across the board in order to encourage enough of that land to be brought on to satisfy the 'greedy' developers and landowners. "But the truth of it is, if we were to reduce those charges, there'd be a windfall for the 'greedy' developers who are now sitting on their hands, (because) it's not worth doing.

You could increase the returns and it wouldn't take as much of a rise in housing prices across the board in order to get enough stock on to the market to satisfy demand." There were 40,000 new dwelling commencements in Queensland in the year to June 30, against demand of 45,000, according to BIS Shrapnel. Home lending to suffer Amid this underlying shortfall comes a temporary slump in loans for buying, building and renovating homes. Housing lending fell by 7.7 per cent in July, according to data released yesterday by the Australian Bureau of Statistics.

Meanwhile, loans for renovations and alterations slumped to their lowest levels in years. "If current figures are any guide, more builders and tradesmen are likely to be knocking on doors looking for work in coming months," CommSec equities economist Martin Arnold said. Dr Gelber said the housing market was "collateral damage" in the Reserve Bank of Australia's war on inflation through interest rate rises. But with the jobs market strong and wages growth steady, rates are doing little to stop waves of disposable household income driving up demand for goods and services, in turn fuelling the inflation that could derail the economy.

The dilemma for the RBA would be to recognise the "tipping point" at which further rate rises would shatter household confidence, Dr Gelber told investors. By Josh Robertson Article from: News.com.au