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Lachlan Colquhoun

Australia's once booming property market has been in the doldrums for about 18 months, and while doomsayers have been predicting the market has much further to fall, one property group has announced the slump has ended.

Research group Australian Property Monitors (APM) released statistics showing that auction clearance rates rose to 50 per cent last month compared with a low of 35 per cent in January and 42 per cent a year ago.

This compares with a high of about 70 per cent during the boom in mid-2003.

'Our latest leading indicators for the residential housing market in Sydney and Melbourne suggest that the housing market has finally found its floor,' said APM research director Louis Christopher.

'I believe housing prices have finally reached their bottom and the chance of a further price correction is now unlikely.'

His words were welcomed by the real estate industry, property investors and those thinking of selling their homes, but the jury is still out on whether APM's call is correct.

JP Morgan economist Jarrod Kerr said he believed the Sydney property market - the nation's  bellwether - was 30 per cent overvalued.

'I'm not saying house prices in Sydney are going to fall 30 per cent, but it does show the overvaluation in the market,' Mr Kerr said.

This view is supported by AMP Capital Investors, which recently estimated that, measured in relation to typical annual income, Australian house values are  2.5 times more expensive than in the US and 1.4 times more expensive than in Britain.

Auction clearance rates are a closely watched figure, but APM's predictions that the market has turned have yet to translate to hard evidence of higher prices. The most recent figures from the Australian Bureau of Statistics show that in the year to March, prices grew just 0.4 per cent nationally, compared with 18 per cent in 2002 and 2003.

The number of houses on the market is also still well down on the peaks of the boom. Figures from the Real Estate Institute showed that house sales in Sydney were down more than 27 per cent in March from March last year, with the number of units and apartments sold down 31 per cent.

Even so, APM's Louis Christopher is not alone in seeing an end to the slump.

At Sydney's open inspections last Saturday, the consensus was that with little stock on the market and interest rates stable, buyers - perceiving that the market was at its bottom - would soon return in numbers and create an imbalance between supply and demand.

One agent said: 'Over the past few months I've seen buyers go from saying they are waiting to buy to saying they should buy something soon before prices go up again. Now that's a significant change in sentiment.'

Much of the credit for any 'soft landing' for the property industry is being given to the Reserve Bank of Australia (RBA), which - after several 0.25 per cent rises in official interest rates - has left its rate stable at 5.5 per cent since March. The RBA's policy is to take the heat out of the market, without pricking the bubble.

Mark Bouris, non-executive chairman of non-bank lender Wizard Home Loans, at a recent Australian Business Economists function, said: 'It would just seem as though we are at the end of the cycle. We are in for a long period of stable house growth.'

His views were supported by the National Australia Bank (NAB), which recently said the spectre of a property market crash had receded due to sustained income and output growth, population increases and 30-year-low unemployment.

The number of people depicting the property market as a bubble had fallen to  50 per cent last month from 90 per cent in late 2003, the NAB said.  The next few months will be crucial in determining if that 50 per cent  are correct, or overly pessimistic.



Sydney still seen as overvalued