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Orderly fall tipped in Australian house prices
19.03.2004
By MIRANDA MAXWELL in Sydney
Australian property prices will fall by an orderly 10 to 15 per cent before flattening over the next two years, averting a severe crash, according to Aussie Home Loans, the country's largest non-bank lender.
The central bank's policy makers would welcome the cooling and be encouraged to leave interest rates alone rather than tightening, John Symond, managing director of Aussie Home Loans, said yesterday.
"It will be a little bit more turbulent than soft, but it won't be a crash landing," Symond said. "It is a good thing what's happening and it will avoid a crash."
After a runaway boom in which average house prices have doubled in six years, Symond said it was now "very hard to find" investors interested in residential property. Agents were trying to "condition" sellers to accept a 10-to-15 per cent price fall.
"One of the most prominent, experienced real estate agents told me that there isn't a buyer to be seen. It's just dead," Symond said.
The median price for a Sydney house reached A$500,000 ($568,000) in the fourth quarter. It now takes 30 per cent of family income to pay a mortgage in Australia, according to the median of a survey from AMP Banking and the Real Estate Institute of Australia.
Interest in property has waned since the Reserve Bank lifted interest rates to 5.25 per cent in December. Borrowing against property by investors fell 15.5 per cent in January while finance for owner occupation fell 7 per cent.
Many young couples borrowed 97 per cent or more of the price of a property in the past 12 months. They were probably in negative equity now, meaning they owed more money on the house than its current market value, Symond said.
Still, Symond expected interest rates to stay unchanged this year, and with no sign of a rise in unemployment, which at 5.9 per cent is close to 14-year lows, there would be no repeat of the wide fall-out from the property crash of the late 1980s where people lost their homes, he said.
"People are better prepared because while they've borrowed a lot more money, interest rates are low and inflation is low and most people wanting jobs have still got jobs so the dynamics are different."
Prices in popular waterside areas and inner-city suburbs would be sustained by constant demand.
"That will keep those prices firmer than the outer suburbs that really don't have a special feature - where mass Australia lives," said Symond.
Meanwhile, further price declines were likely for apartments in the central business district.
"You've got literally thousands of apartments coming up," said Symonds. "Who is going to live there?"
19.03.2004
By MIRANDA MAXWELL in Sydney
Australian property prices will fall by an orderly 10 to 15 per cent before flattening over the next two years, averting a severe crash, according to Aussie Home Loans, the country's largest non-bank lender.
The central bank's policy makers would welcome the cooling and be encouraged to leave interest rates alone rather than tightening, John Symond, managing director of Aussie Home Loans, said yesterday.
"It will be a little bit more turbulent than soft, but it won't be a crash landing," Symond said. "It is a good thing what's happening and it will avoid a crash."
After a runaway boom in which average house prices have doubled in six years, Symond said it was now "very hard to find" investors interested in residential property. Agents were trying to "condition" sellers to accept a 10-to-15 per cent price fall.
"One of the most prominent, experienced real estate agents told me that there isn't a buyer to be seen. It's just dead," Symond said.
The median price for a Sydney house reached A$500,000 ($568,000) in the fourth quarter. It now takes 30 per cent of family income to pay a mortgage in Australia, according to the median of a survey from AMP Banking and the Real Estate Institute of Australia.
Interest in property has waned since the Reserve Bank lifted interest rates to 5.25 per cent in December. Borrowing against property by investors fell 15.5 per cent in January while finance for owner occupation fell 7 per cent.
Many young couples borrowed 97 per cent or more of the price of a property in the past 12 months. They were probably in negative equity now, meaning they owed more money on the house than its current market value, Symond said.
Still, Symond expected interest rates to stay unchanged this year, and with no sign of a rise in unemployment, which at 5.9 per cent is close to 14-year lows, there would be no repeat of the wide fall-out from the property crash of the late 1980s where people lost their homes, he said.
"People are better prepared because while they've borrowed a lot more money, interest rates are low and inflation is low and most people wanting jobs have still got jobs so the dynamics are different."
Prices in popular waterside areas and inner-city suburbs would be sustained by constant demand.
"That will keep those prices firmer than the outer suburbs that really don't have a special feature - where mass Australia lives," said Symond.
Meanwhile, further price declines were likely for apartments in the central business district.
"You've got literally thousands of apartments coming up," said Symonds. "Who is going to live there?"