http://www.news.com.au/business/money/story/0,25479,23508426-5013951,00.html
By Nick Gardner April 09, 2008 07:31am
a.. Sydney house prices tipped to fall in the next two years
a.. VIDEO: Rising interest rates explained
b.. In-depth: The latest interest rate news and features
SYDNEY house prices could fall by as much as 30 per cent in the next two
years, economists say.
They warned the pain will not be confined to Sydney's struggling south
and west, where prices have already dropped dramatically.
Affluent suburbs are also in the firing line as the combination of
overpriced properties and rising interest rates, which caused the 2004
market downturn, hit again in 2008.
Scott Haslam, chief economist at investment bank UBS, said the latest
data showed house prices were up 15 per cent, the strongest growth in
four years.
"With the spate of interest-rate rises we've seen, affordability is now
at a new low," he said.
"As periodically happens, we will most likely see a dent in demand as a
result.
"In 2004 we went from 20 per cent growth to zero per cent in one year
and the same ingredients are in place for a repeat performance."
Morgan Stanley chief equity strategist Gerard Minack said prices could
fall by as much as 25-30 per cent in the next two or three years if
Australia fell into recession, and by 10 per cent or more if we have a
soft economic landing.
And the wealthiest areas could be hit hardest.
"Some of the top-end properties are more vulnerable than the
middle-market because their buyers are typically employed in sectors
most likely to be hammered by an economic slowdown and rise in
unemployment, namely banking and finance," he said.
"We could also see big falls in the places these people have holiday
homes - the (NSW) Central Coast for example - which could even see
prices fall by 50 per cent."
The International Monetary Fund recently said Australian property was
among the most overvalued in the world. It said at least 25 per cent of
the increase in value over the past decade could not be justified,
leaving the market ripe for a correction.
While latest data showed prices rising strongly in the March quarter,
AMP chief economist Shane Oliver said the rises were unsustainable.
"In Sydney, a typical house will cost 8.4 times a typical family's
household income, which is patently unaffordable," he said.
"That compares with 3.6 times income in America - where prices have
recently fallen by 10 per cent - and 5.5 times income in the UK, which
is currently experiencing a housing downturn.
"It seems likely that Sydney house prices will follow suit and could
fall by around 5 per cent this year. We have had a housing boom in the
past few years and usually, after a boom, prices fall back."
In western Sydney they're already doing it tough and prices have been
dropping, but those falls could happen right across the city.
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Bonzo
".it should not be surprising to see hordes of former Reds, or of those
who otherwise would have become Reds, turning from Marxism and becoming
the Greens of the ecology movement. It is the same fundamental
philosophy in a different guise, ready as ever to wage war on the
freedom and well-being of the individual." Dr. George Reisman's book
Capitalism
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