Little respite likely for beleaguered home owners
Property prices in Australia's major metropolitan areas are continuing on their downward trend. The Housing Industry Association says sales of new homes in Sydney, Melbourne, Perth and Adelaide fell for the fourth straight month in September, prompting a housing construction organisation to warn of the risk to the industry if interest rates are raised too soon.
While last month's figures have still to be released, the association says they are lower than the previous month. It says sales of new homes fell 2.6 per cent to 6,887 in August, the Housing Industry Association says. This followed a 7.1 per cent drop in July and brought the decline since April to 19.7 per cent.
According to the association, sales in August were 20.5 per cent below the level recorded a year earlier in August last year and at their lowest point since December 2008. These numbers have forced the developers to appeal to the Reserve Bank of Australia to reconsider raising interest rates anytime soon.
A news report says that Master Builders, the association of property developers, is becoming more pessimistic with the winding down of the federal government's stimulus package and is urging the Reserve Bank not to raise interest rates.
Builder sentiment fell in the third quarter of the year, corresponding with declining expectations for building industry activity, the Master Builders' latest national survey of building and construction reports.
Master Builders' chief economist, Peter Jones, says builders are experiencing renewed pessimism after a recent pick-up in sentiment. Confidence previously had collapsed after the global financial crisis and economic downturn.
Property agents say that Sydney, the top property market in Australia, seems to have been in a holding pattern for the past few months. This was because of the Australian general elections, unusually cold weather and general uncertainty about the global economy.
Media reports of rising auction clearance rates during that period masked a generally low underlying turnover.
Property experts expect prestige residential prices in Sydney to retreat in the months ahead. Whether or not this will result in a buyers' market at the top end of the Sydney property market will also depend on the motivation of vendors to meet that market.
With little evidence of vendors under financial stress and school holidays looming, the most likely outcome for Sydney properties this Christmas will be a continuation of relatively low sales volumes.
As for Melbourne, the second biggest property market, prices seem to be holding up relatively well. Inner-city suburbs, the most popular place for investors, will continue to steadily rise, say property agents. Rental returns will strengthen, property trusts are slowly gathering momentum again and may put pressure on stock levels.
While a good, well-positioned, two-bedroom apartment in a Melbourne suburb, within 10km of the central business district, is worth between A$500,000 (HK$3.75 million) and A$600,000, it will take about six years to reach A$1 million, property agents say. They expect this to occur sooner if interest rates rise as a result of the Australian economy becoming progressively stronger.
The market for homes worth more than A$1 million is steadily gathering momentum and the upper end of the market is tied far closer to the performance of the economy than the lower end.
Property prices in the Western Australia city of Perth have been on a high since the mining sector began to experience a boom.
Property agents in Perth say that the Western Australian economy saw high levels of growth during the resources boom and has been cushioned from the economic impact of the global financial crisis by continued strong demand for its resources.
During the resources boom, high levels of growth in employment and wage levels occurred, fuelling migration - international and interstate - to Western Australia which placed increased demand on an undersupplied residential property market.
As a result of the demand for housing, the median price of all dwellings increased significantly in the Perth metropolitan area and, combined with the availability of funds to developers, many residential projects were initiated.
The prices commanded by developers of residential projects were supported by the boom which covered the resultant increased labour and construction activity.
