Link to an ABC Newsradio article on property market
http://www.abc.net.au/news/newsitems/200506/s1385867.htm
Financial analyst ABN AMRO predicts house prices in Australia will fall in real terms for several years.
In their latest report on house prices, analysts at the investment and banking service provider say the only good thing to come out of the downturn is that interest rates may stay steady for some time to come.
"The fundamentals for house prices suggest that prices are way out of line with where they should be, based on incomes and rent," said Keiran Davies, one of the authors of the report.
"History shows that when you've had the sort of run-up in house prices like we've seen in the past few years, you often see a long period where prices, at best, do nothing.
"I think it will take a long time [to catch up], I think housing markets always move more slowly than other asset markets.
"I think it'll be a very slow, drawn-out process as people gradually wind back their expectations of quick capital gains and as wages slowly catch up to where prices are.
"I think [five to 10 years] is right. If you look at the history of prices though, that sort of period is not unusual.
"Keep in mind, what you often see with the housing market is brief bursts of growth like we've had recently and then long periods where prices do nothing."
The report goes further, saying the decline is likely to be larger than the decline seen during the recession of the early 1990s, and is close to the post-World War II slump.
It says the only good news is that interest rates should stay put for some time.
Different take
But if you listen to other economists, even that good news may be short-lived.
BIS Shrapnel has been analysing the housing market and has a different take on its future.
Angi Zigamonaus is the author of the BIS Shrapnel report on housing prices.
"From our point of view, we're still expecting prices to hold up over the next 12 months while interest rates remain low in a long-term sense," he said.
"But throughout the course of the next 12 to 18 months we are expecting interest rates to begin to rise.
"This will be driven by increased business investment which will in turn underpin the next leg of economic growth and will also underpin declining unemployment rates.
"With that, we expect to see stronger wages growth, stronger inflationary pressures which ultimately will lead to higher interest rates.
"And that will have a more negative effect on residential property prices than what we've seen already."
Price drops
Prices in Sydney and Melbourne fell 3.4 and 1.7 per cent respectively over the year to March, with some analysts predicting a further fall of up to 20 per cent in these markets.
Still, other capitals such as Perth and Adelaide bucked the national trend, with both cities showing growth over 8 per cent during the year.
Despite the ABN Amro report, Ian Wells, president of the Real Estate Institute of Australia, is optimistic.
"I would have to say that there are varying reports, via columnists across Australia at any point in time, that make predictions," he said.
"Some are right and some are wrong. You would particularly need to have a glass ball to be 100 per cent accurate.
"However, I think that economy is still looking fairly strong, interest rate movements appear to be stable, employment is still high.
"So consequently, what we're seeing is probably the normal, cyclical nature of property and other forms of investment, if you like
See Change
http://www.abc.net.au/news/newsitems/200506/s1385867.htm
Financial analyst ABN AMRO predicts house prices in Australia will fall in real terms for several years.
In their latest report on house prices, analysts at the investment and banking service provider say the only good thing to come out of the downturn is that interest rates may stay steady for some time to come.
"The fundamentals for house prices suggest that prices are way out of line with where they should be, based on incomes and rent," said Keiran Davies, one of the authors of the report.
"History shows that when you've had the sort of run-up in house prices like we've seen in the past few years, you often see a long period where prices, at best, do nothing.
"I think it will take a long time [to catch up], I think housing markets always move more slowly than other asset markets.
"I think it'll be a very slow, drawn-out process as people gradually wind back their expectations of quick capital gains and as wages slowly catch up to where prices are.
"I think [five to 10 years] is right. If you look at the history of prices though, that sort of period is not unusual.
"Keep in mind, what you often see with the housing market is brief bursts of growth like we've had recently and then long periods where prices do nothing."
The report goes further, saying the decline is likely to be larger than the decline seen during the recession of the early 1990s, and is close to the post-World War II slump.
It says the only good news is that interest rates should stay put for some time.
Different take
But if you listen to other economists, even that good news may be short-lived.
BIS Shrapnel has been analysing the housing market and has a different take on its future.
Angi Zigamonaus is the author of the BIS Shrapnel report on housing prices.
"From our point of view, we're still expecting prices to hold up over the next 12 months while interest rates remain low in a long-term sense," he said.
"But throughout the course of the next 12 to 18 months we are expecting interest rates to begin to rise.
"This will be driven by increased business investment which will in turn underpin the next leg of economic growth and will also underpin declining unemployment rates.
"With that, we expect to see stronger wages growth, stronger inflationary pressures which ultimately will lead to higher interest rates.
"And that will have a more negative effect on residential property prices than what we've seen already."
Price drops
Prices in Sydney and Melbourne fell 3.4 and 1.7 per cent respectively over the year to March, with some analysts predicting a further fall of up to 20 per cent in these markets.
Still, other capitals such as Perth and Adelaide bucked the national trend, with both cities showing growth over 8 per cent during the year.
Despite the ABN Amro report, Ian Wells, president of the Real Estate Institute of Australia, is optimistic.
"I would have to say that there are varying reports, via columnists across Australia at any point in time, that make predictions," he said.
"Some are right and some are wrong. You would particularly need to have a glass ball to be 100 per cent accurate.
"However, I think that economy is still looking fairly strong, interest rate movements appear to be stable, employment is still high.
"So consequently, what we're seeing is probably the normal, cyclical nature of property and other forms of investment, if you like
See Change
