Interest rates and financial woes in Europe could cool overheated Oz property market
Property prices in Australia could start to fall as a result of interest rate cuts and a cut back in mortgage lending, it is claimed.
Despite prices increasing by up to 20% in the last year, a six interest rate rises in the last eight months could put the brakes on and there is evidence of a slowdown, experts believe.
REAL estate experts are bracing for the housing market to finally slow down, as the effects of the latest interest rate rise filters through to buyers.
According to Australia’s largest real estate group Ray White, turnover in the first three months of the year is sluggish compared with last year, up only 8%, the smallest increase since the global financial crisis.
The reduced activity has continued in to April, said Brian White, joint chairman. ‘Judging by our April results, it looks as if the interest rate increases are having an impact on activity. With the additional interest rate hike, it would be the first time that the Australian market has not shrugged off the pattern of increases in the past. At last, it would appear that the ambition of the Reserve Bank to slow down the residential activity has been achieved,’ he explained.
Another outcome of soaring prices is an increased in those struggling to make mortgage payments. According to independent interest rate monitor RateCity about 27,000 households have already missed mortgage repayments and thousands more are expected to fall behind after the latest interest rate rise.
The number of securitised home loans more than 90 days in arrears has rapidly increased from 0.05% in January to a current rate of 0.6% it said.
The worsening financial crisis in Europe could also affect the Australian market. Some analysts even believe there might be a rate decrease later in the year, although most are predicting they are likely to remain on hold.
‘There will be a slower housing market in Sydney in the second half of this year, even with a normal economy,’ said SQM Research managing director Louis Christopher. But he added that if the euro zone woes worsen there would be the potential for quarter on quarter falls at the end of the year.
Residex chief executive John Edwards believes price growth will moderate and he forecasts 5 to 8% overall. The top end of the market would do best, while some cheaper areas of south western Sydney were already going backwards.
According to Australian Property Monitors economist Matthew Bell prices in the most expensive half of the property market would rise at twice the rate of the bottom half.