Housing market conditions 'tipped to worsen'
- From: AAP
- January 25, 2011
Interest rate rises and tight credit conditions are expected to push house prices down in 2011
- Rates put the squeeze on property
- Price expectations turn negative - study
- Tipped to fall by 0.5 per cent
HOUSING market conditions are expected to worsen over the next 12 months, following last year's interest rate rises and ongoing tight credit conditions.
The National Australia Bank Residential Property Index for December fell to 27 points, down from 44 points in November. It was still above the zero level that separates growth from contraction.
"National house price expectations have now turned negative," NAB said.
"Tight credit conditions and rising interest rates continue to be identified as the main impediments to new residential developments and existing property sales."
The central bank raised the cash rate four times in 2010, taking it from 3.75 per cent to its current 4.75 per cent.
The survey showed Australian house prices are tipped to fall by 0.5 per cent over the next 12 months, with small increases in Adelaide, Canberra and Sydney offset by declines in Brisbane and to a lesser extent Perth and Melbourne.
The survey was conducted prior to recent extreme flooding in Queensland, New South Wales and Victoria, however.
Of the effect of the flooding in Queensland, NAB Group chief economist Alan Oster said the next residential survey "will be worse".
Capital growth of houses is expected to outpace apartments, with lower value properties (under $500,000) set to record the strongest growth over the next 12 months.
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 per cent and 52 per cent of demand respectively.
Demand for new residential developments and existing property is expected to be strongest for houses within the inner city.
Adelaide, Brisbane and Melbourne are currently 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 per cent over the next 12 months and by 4.1 per cent over the next two years.
Mr Oster said the survey was conducted from late November last year to early December, before the worst of the rains hit Australia's east coast.
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