18 March 2009

Aussie home prices to fall 30% ~ No Question!!

This is a given, we are merely the last dominio to fall.....

THE Australian housing market is facing the prospect of a "perfect storm" of financial pressures - including high mortgage debt, overvalued homes and rising unemployment - in which prices could eventually fall by as much as 30 per cent, investors have been warned.

Research compiled by international analysts has indicated that while domestic house prices held up well amid the breaking global financial crisis, in the impact of the worsening local downturn they have come off their peak.

Prices are beginning to slide in line with declines in the US and Britain, the report suggests.

There, the fall in housing values has exacerbated recessions and prices have started dropping below or sharply back to what is described as "fair value" levels after nearly 10 years of soaring property costs.

The special report was compiled by BCA Research in Canada. It shows that the residential market fell 25 per cent in the US and 18 per cent in Britain last year.

By contrast, Australian prices slipped a "mere" 4 per cent from the all-time highs recorded in the first quarter of last year.

The authors of the report say the "ferocity of the price collapses" in the US and Britain was made worse by the meltdown in the financial services industry - a factor that is affecting Australia's two financial centres, Sydney and Melbourne.

"The housing market is looking particularly vulnerable, with overinflated prices, deteriorating affordability and slowing household income growth," the report says. "There is an increasing possibility of a major housing bust in Australia."

The authors of last month's report, which is now circulating among local investors, accept that a variety of positive factors could help cushion any fall.

These include past budget surpluses, the Federal Government's two stimulus packages, the strength of the Australian banks, which have avoided a "disastrous lending binge", falling interest rates and the drop in the value of the Australian dollar.

The report's conclusions are set against a background of tentative signs that the housing market is shrugging off the immediate effects of the downturn, helped in part by the Government's $14,000 first-home buyer's grant and an extra $7000 for people who purchase new homes.

Latest figures showed that $8 billion of new home loans were taken out at the end of January of which a quarter were advanced to first-time buyers who are driving a mini-revival in sales at the lower end of the market.

That has prompted the Sydney Chamber of Commerce to press the Federal Government to extend the level of cash support to first-time buyers beyond the current June 30 cut-off point.

Warning t the grant's removal could send the housing market into a tailspin, the chamber's executive director, Patricia Forsythe, said: "Next to the massive reduction in interest rates, the first-home buyer boost has been the most successful stimulatory measure for the economy."


1 comment:

Anonymous said...

Wow, that's just insane. I mean parts of Asia and Australia I think are still lucky, they're more stable than the US and many other countries deeper in debt. I just hope that even in dire events such as this, people will still be able to make wise investments and rise from this.