Wednesday, December 01, 2004

Property bubble deflates further (Australia)


By Lisa Pryor, Urban Affairs Reporter, Fairfax Digital

Hopes that the housing downturn is a blip that will soon correct itself were dampened yesterday, as a Westpac Bank economist predicted that prices would not return to an annual growth rate of 10 per cent a year until 2008.

While owner-occupiers and first-home buyers would be important to the market next year, residential property would not be attractive to investors for up to five years, Bill Evans told a Real Estate Institute of NSW briefing.

"That froth from investors that we really need to boost prices just won't be there," he said.

The prediction came as figures were released showing that Sydney house prices dropped 3.85 per cent in the three months to September, to a median of $500,000.

The president of the Real Estate Institute of NSW, Rowen Kelly, said it was the first time the institute's figures had shown a fall since 2001, although other important price indexes had been showing falls since the beginning of the year. "The good news is it is still an increase over a 12-month period," he said.

The biggest falls were in suburbs 10 to 20 kilometres from the city, Mr Kelly said. The median house price in that area fell 7.32 per cent, with some of the largest falls found in Auburn, Burwood, Rockdale and Strathfield.

Unit prices dropped by 3.9 per cent, to a median of $370,000. The biggest fall was in South Sydney, where prices were down 15.9 per cent in three months.

Over the past decade, Sydney house prices have grown by an average 9.38 per cent a year, while unit prices have grown by 8.41 per cent.

As prices fall, it appears that fewer home owners are selling and there has been a big drop in the number of houses on the market. The number of house sales was down 26.6 per cent compared with the same time last year and unit sales were down 37.7 per cent.

Only 11 houses were sold in the Hunters Hill council area during the quarter, less than one a week.

As fewer investors buy properties to rent out, fewer properties are being left empty, with a 2.8 per cent vacancy rate recorded in September compared with a high of 3.7 per cent last December.

"There is no doubt that the interest in the residential property market as an investment vehicle has dramatically decreased ... but we have turned the corner on vacancy rates," Mr Kelly said.

As for interest rates, Westpac's Mr Evans said yesterday that if there was any movement in interest rates next year, it was likely to be a small increase because of strong investment and employment figures and high consumer confidence.

In other developments yesterday, a report released by the NSW Auditor-General showed a blow-out in the time it takes for the Department of Infrastructure, Planning and Natural Resources to approve large infrastructure proposals. It took 121 days to assess proposals last financial year, up from 95 days the year before.

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