australian property prices drop for second consecutive quarter
News Posted On: 14 October 2011
Property prices in Australia have fallen for the second consecutive quarter, and this decline is expected to continue as housing affordability becomes more of an issue. According to the latest Australian Residential Property Index, homeowners in the country are feeling more pessimistic about the property market, due to rising unemployment and slower sales. House prices are expected to drop by 1% over the next year, but rents are expected to increase by 2.5%.
Prices dropped by 2.4% in the third quarter, and are expected to increase by just 0.5% during the next two years, despite the fact that fewer Australians expect interest rates to increase over the next year. Housing demand remains relatively weak, although inner-city homes are selling slightly more quickly.
Economists think Australians may be overly pessimistic about the property market, pointing out that interest rates are expected to stay low for some time, and although unemployment is rising it is still relatively low. There is also a shortage of housing which should shore up house price growth. On top of that, only around 7.7% of homes bought after 2007 are worth less than their purchase figure, much less than in the likes of the US and UK. Property in capital cities has increased in value by around 30% in the five years to June 30, and around 45% of properties are worth more than double their purchase price.
However, while most Australians are managing to keep up with their mortgage payments, the mortgage delinquency rate did increase by 1.36% during the second quarter to 1.67% during the third quarter. Also, unemployment is currently at an eight-month high and Australian home loan approval levels for July reflected this. It is a delicate balance that the sands of time will settle.
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Written by Les Calvert
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