I know, not another doom and gloom thread. I’ve been watching for some time now what’s been unfolding and quite frankly, I don’t like it neither, but it’s a reality many of us will have to accept. The boom is turning to bust and in all likelihood it will be major.
THE Australian housing market is facing the prospect of a “perfect storm” of financial pressures – including high mortgage debt, overvalued homes and rising unemployment – in which prices could eventually fall by as much as 30 per cent, investors have been warned.
Research compiled by international analysts has indicated that while domestic house prices held up well amid the breaking global financial crisis, in the impact of the worsening local downturn they have come off their peak.
Prices are beginning to slide in line with declines in the US and Britain, the report suggests.
There, the fall in housing values has exacerbated recessions and prices have started dropping below or sharply back to what is described as “fair value” levels after nearly 10 years of soaring property costs.
The special report was compiled by BCA Research in Canada. It shows that the residential market fell 25 per cent in the US and 18 per cent in Britain last year.
By contrast, Australian prices slipped a “mere” 4 per cent from the all-time highs recorded in the first quarter of last year.
The authors of the report say the “ferocity of the price collapses” in the US and Britain was made worse by the meltdown in the financial services industry – a factor that is affecting Australia’s two financial centres, Sydney and Melbourne.
“The housing market is looking particularly vulnerable, with overinflated prices, deteriorating affordability and slowing household income growth,” the report says. “There is an increasing possibility of a major housing bust in Australia.”
And what were the government thinking when the upped the first home – buyers grants? God only knows. The other explanation was the RBA and Federal Government hoped it would prevent a rapid price deflations in housing. They’ve got it wrong, and maybe now might be a good time for them to re-focus on the bigger picture of housing affordability in the long term.
Filed under: Australian Economy |