Analysts and economists say that a slowing in house price rises means that interest rates rises have done their job in terms of slowing the market which some thought was in danger of over heating.
The National Australia Bank Residential Property Index for December fell to 27 points, down from 44 points in November.
‘National house price expectations have now turned negative. Tight credit conditions and rising interest rates continue to be identified as the main impediments to new residential developments and existing property sales,’ it said.
Interest rates increased four times in 2010 from 3.75% to its current 4.75% and a survey from the bank shows that prices are expected to fall by 0.5% in 201. Its report suggests there could be small price increases in Adelaide, Canberra and Sydney but this will be offset by declines in Brisbane and to a lesser extent Perth and Melbourne.
The effects of the severe floods in Queensland also need to be taken into account and this is likely to show up in the next NAB housing report.
Resident owner occupiers are set to remain the key drivers of demand and will continue to dominate the markets for new and existing properties over the next year, accounting for 48% and 52% of demand respectively.
In the report Adelaide, Brisbane and Melbourne are identified as cities with the greatest availability of rental property. Adelaide is expected to have the greatest rental availability over the next 12 months, with Sydney lagging.
On average, respondents anticipated residential rents rising by 2.8% over the next 12 months and by 4.1% in the next two years.
The latest data from the Australian Bureau of Statistics shows that property prices rose marginally by 0.7% in the December quarter but showed continued weakness in Brisbane and Perth. The December quarter result was better than the 0.3% fall in the previous quarter.
Commsec economist Savanth Sebastian said that the numbers also showed that successive cash rate hikes by the Reserve Bank of Australia (RBA) in 2010 had worked in terms of cooling the market.
Meanwhile, the latest RP Data-Rismark home value index shows that property prices in capital cities rose by a tepid 0.2% in the final quarter of 2010. Rismark managing director Christopher Joye said the capital city housing market had been shaken by the four interest rate rises in 2010.
