Just when Australia's property bubble looked like it was never going to burst, along came UBS Warburg with the prediction that the real estate market would need to fall by 20 per cent across the country in the next three years, in order to get back to normal.
If this happened, the global investment bank forecast late last year, Melbourne prices would fall by a massive 36 per cent, and Sydney and Brisbane by 15 per cent. Could this possibly be true?
Then, as the naysayers began crying foul, researchers countered with their bombshell: contrary to the popular myth that Australian house prices never fall, Sydney median house prices did indeed fall by 25 per cent within a two-year period from 1988 to 1990.
Drawing a comparison, UBS Warburg notes: 'The consistent sharp increases in housing prices over the past couple of years may well now be undermining consumers' willingness to invest in property by reducing its affordability.'
Further, it contends that the government-funded First Home Buyers Grant, an incentive of A$14,000 (about HK$64,400) for people building their first home and A$7,000 for purchase of existing homes introduced in July 2000, pushed up demand unsustainably. UBS Warburg says that this points to a future period of below-normal demand.
In January, came the news that seemed to give further weight to these predictions. New figures showed building approvals fell by 25.6 per cent in November: below expectations for a 15 per cent decline, and taking approvals to their lowest level in 10 months.
