Property sector cools, but new report says no housing bubble to bust

By Michael Janda

Dr Kirchner argues that lower interest rates have not made housing more affordable, as they have been a key factor driving up home prices - two separate economic studies find that a 1 per cent decline in inflation-adjusted interest rates causes a 4-5. 4 per cent rise in house prices.

The bank’s survey of investors, real estate agents, developers and other market participants also showed a more subdued outlook for home price growth: Queensland (2. 3 per cent) and Victoria (2. 1 per cent) were expected to have the best gains over the next year, with Western Australian property the worst (0. 2 per cent).

Deteriorating capital and rental growth, combined with a decline in foreign buyer interest to its lowest share of the market in two years, drove the bank’s Residential Property Index down 17 points to 19 - the lowest reading since mid-2013.

The National Australia Bank’s quarterly property survey shows capital growth has slowed from 1. 7 per cent in the first quarter to 0. 9 per cent for the most recent three months.

The report says this increase in prices is likely to have been a factor in home ownership rates declining from 71 per cent in 1995 to 67 per cent in 2012, with even larger falls in the younger first home buyer demographics.

“Reducing incentives for risk-bearing through the tax system will adversely effect the supply side of the housing market, as well as reduce demand, with uncertain implications for house prices and housing affordability,” he argued.

That property market weakness in WA reflects weaken rental returns, with rents down 2 per cent last quarter after a smaller fall in the first few months of the year.

Read more here: ABC


You may also like...

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>