Boom is turning to bust as property prices fall sharply in Australia

Property prices in Australia are plummeting as the credit crunch takes hold and it is only a matter of time before foreclosures, bankruptcies and repossessions take hold, according to real estate experts.

Australian Property Monitors is predicting that the value of houses and units will fall by 10% in cities across the country during the next year.

Already house values in the June quarter dropped to their lowest level since 2004, a strong contrast to the recent boom conditions in Australia.

'The implication of falling property prices is that those borrowers that took out 100% loans, or those borrowers that flew too close to the sun by taking out loans with very small deposits, may find themselves in a situation very soon where they're sitting on negative equity,' said APM general manager Michael McNamara.

'There is no doubt that the Australian market will see more foreclosures, repossessions and bankruptcies over the coming years. But it's unlikely that we're going to see the same sort of widespread abandoning of the family home as what is happening in some cities in the United States,' he added.

Melbourne has recorded home prices down 1% but apartments are holding steady. Sydney has a much larger problem with a 2.1% quarterly fall while Brisbane's weakness is 'pronounced' with houses down 1.3% and units 3%.

The former boom town of Perth saw houses lose 2.8% for the quarter. Even in Canberra a glut of unsold properties is putting downward pressure on prices.