Australia | Feb 02 2009
By Chris Shaw
Australian property prices remain under pressure according to December quarter house price data released today, but in the view of ANZ Banking Group economist, Alex Joiner a US style meltdown in prices remains unlikely given the shortage in available properties in the local market.
Established house prices fell in the December quarter by 0.8% and Westpac notes while this was a little better than the 1.1-1.4% fall predicted on the basis of recent data, the December update was accompanied by downward revisions to the data for previous quarters. As a result, prices for the September quarter were revised to a fall of 2.4% from 1.8% previously.
In state-by-state terms, performance was mixed, as Melbourne and Brisbane recorded the largest falls of 1.7% and 1.2% respectively, while gains of 1.6% and 0.7% were recorded in Darwin and Canberra.
In annual terms prices fell by 3.3% for the 2008 year but as Joiner points out, this needs to be viewed in context as it follows a 13% gain in 2007. In Joiner’s view, it does set the scene for a period of consolidation in the Australian property market. Overall affordability is improving and this should help stimulate additional demand and limit further falls, but there is still uncertainty given the state of the domestic and global economies.
The major risk in Joiner’s view stems from rising unemployment as that could impact on demand for housing, while ongoing credit issues could make lending less available and so keep some buyers out of the market. Given these risks, Joiner suggests there is scope for further modest falls in prices in the next quarter or two before house prices start to slowly recover.
Commonwealth Bank senior economist Michael Workman suggests the fact house prices are trending lower, along with the significant falls in equity prices in the past year, are likely to put household spending under pressure and this has negative implications for economic growth.
It is also likely to impact on the housing market as it may be causing some potential buyers to put off making a purchase, which leads Workman to suggest it will be difficult for house prices to recover over the course of this year.
Westpac agrees and expects while lower interest rates and the expanded first home buyers scheme will increase interest in the market, some segments will remain under pressure for the rest of this year at least. According to Joiner, the markets most at risk of further falls are Perth and Brisbane, where prices have enjoyed some of the strongest gains in recent years.