Only way is up for house market as buyers bank on cut
- From: The Australian
- October 01, 2011
Source: The Australian
THE housing market is beginning to show signs of life, with new data indicating that national house prices have reached their bottom.
But the relief for homeowners concerned by evaporating values will not be shared equally across the country, with house and unit prices expected to continue to fall in Sydney, Melbourne and Perth.The decline in home values has slowed, with prices across Australia declining a mere 0.1 per cent in raw terms in August compared with a fall of 0.6 per cent a month earlier, according to the RP Data-Rismark home value index.
"We're probably nearing the bottom of the market -- but not in every city," RP Data senior analyst Cameron Kusher said.
"Brisbane is close to the bottom and so probably is Adelaide. Perth isn't. Values there fell 2 per cent this month."
The report also showed some positive signs for investors, with total return basis on capital city dwellings -- which includes capital growth and rents taken on a property -- up 0.2 per cent in August. The best investment returns were to be found in Sydney and Canberra.
The market is also benefiting from the increasing chance the Reserve Bank of Australia will cut rates at some point this year.
A number of financial institutions, including Westpac and AMP, have forecast rate cuts before the end of the year, and financial markets are pricing in nearly six rate cuts by June next year -- which would bring the current cash rate of 4.75 per cent to just over 3 per cent.
"As the most interest rate sensitive sector of the economy, Australia's housing market will be the main beneficiary of any rate reductions. Almost all Australian mortgage debt is variable rate, and prices off the RBA's target cash rate one way or another," Rismark economist Christopher Joye said.
Mr Kusher was circumspect, however, about whether lower rates would see a sudden improvement in the market.
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