The Upside Of Falling Prices In Australian Real Estate

The recent downturn in Australian real estate prices does have an upside. With prices falling, it is less likely that  interest rates will be raised, and there are …

The recent downturn in Australian real estate prices does have an upside. With prices falling, it is less likely that  interest rates will be raised, and there are now fewer concerns about the market reaching bubble status, after an extended period of steep growth. Strong fundamentals and short supply should also help insulate Australia’s property market from drastic price declines. See the following article from Property Wire for more on this.

Residential property prices in Australia are falling after a period of soaring rises amid what experts are describing as a period of consolidation.

With average values down 0.7% in the June quarter, analysts have welcomed the move which they say will prevent a real estate bubble. It is the first price fall for 17 months and there were concerns that interest rates were going to be raised again to prevent the market getting out of control.

But experts say there is unlikely to be a significant downturn because of a national housing shortage. Australian Property Monitors estimates there is a shortage of 200,000 dwellings in Australia, which has helped to put a floor under house prices.

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In the three months to June, all capital cities experienced virtually no growth or a fall in values, with the exception of Adelaide, according to the latest RP Date-Rismark Home Value Index.

Despite being the largest monthly fall since April 2008, RP Data’s Tim Lawless said the result was not surprising. ‘We’ve been seeing the writing on the wall because we’ve also seen auction clearance rates deteriorating and we’ve seen housing finance commitments falling, suggesting demand in the marketplace has been abating,’ Lawless explained.

ANZ economist David Cannington also said the result was expected given the market had undergone so many months of continuous growth. ‘While there was a fall in the month, in annual terms house prices are still 10.5% higher than what they were a year ago,’ he said.

He does not think there will be a sharp reduction in prices. ‘We think the underlying fundamentals of the Australian housing market support house price growth, so we don’t think it’s going to pop and house prices are going to collapse,’ he told news.com.au.

‘The Australian market is entering a period of flat growth or some consolidation. I think it’s the end of the levels of growth that we saw last year, that’s pretty clear, but I don’t expect that we’ll see entrenched falls in house prices. This is just part of the cycle of coming back from those high growth rates,’ he added.

Lawless believes that basic housing market fundamentals remain relatively healthy but with pre-listing activity slowing down, buyers could expect fewer properties entering the market.

‘We may see further declines, we may see some further increases, but it’s essentially going to be a flat market going forward,’ he said.

Experts believe that the Reserve Bank would be pleased with the result and is now unlikely to increase interest rates this month.

This article has been republished from Property Wire. You can also view this article at
Property Wire, an international real estate news site.

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