House prices have already bottomed, analysts say, and there is little expectation the serious downturn seen in some overseas housing markets this year will be repeated here, despite the global economic turmoil.
This week’s shock 1 percentage point rate cut and the tightness of the supply within the market were just come of the fundamentals that had put a floor under house prices, said Citigroup’s director of economic and market analysis, Shane Lee, whose economic modelling has forecast a 4 per cent rise in the prices in 2009 followed by an increase in values of about 10 per cent in 2010.
Mr Lee said while further interest rate cuts would help the property market, he was not predicting boom conditions similar to those experienced in 2002 and 2007. “We know interest rates are coming down and the cost of servicing debt is getting cheaper, so we’ll see fewer foreclosures and less downward pressure on house prices. If interest rates were stable or increased further, then I wouldn’t expect to see growth in the market, ‘he said.
“The recessionary type of argument for Australia would probably stack up if the corporate sector wasn’t in such good shape, but it is compared with the UK and particularly the US. Banks can still lend. There have been some cutbacks in some sectors, but we are entering a period of debt consolidation and fairly modest house price growth.”
RP Data property research analyst Tim Lawless said Australia’s property market had passed through the lowest stage in the cycle and peak buying conditions would evaporate in the first quarter of 2009.
He said the country’s supply and demand imbalance, with record migrant growth and flat dwelling commencements, had created a natural floor in prices.
“When we look at the cycles we start to see the bottom of the market when interest rates start falling,” he said. “This weeks cut was a clear indication that the monetary policy is changing and the peak buying conditions in the market place won’t be around for too much longer with more buyers coming into the market. We expect it to be a gradual process. With more buyers in the market prices will eventually start to rise.”
Source: Australian Financial Review, Ocotber 10 2008, Michelle Singer
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