Why Australian property prices are set to drop

  • 12 years ago
  • Uncategorized

A leading international
strategist believes that property prices in Australia will continue to fall
over the next two years.  Investec
Asset Management strategist Michael Power says that while property prices in
the country have fallen by six per cent since 2010, they could fall by up to a
total of 20 per cent by 2014.

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Continued price falls may happen but am Australian property crash is

Mr Power, the South African based
strategist, said: “We’re not seeing anything like the US, Irish or Spanish
property bust here.  But I think
over the next 18 months it could go down by double digits, 12 or even 15 (per
cent).  A 15 to 20 per cent (fall)
would be my outside downside over the entire period.”

According to the The Economist Property Index, Australian
residential prices were among the highest in the world.  The
reports that prices ‘had long seemed particularly elevated,
something which eventually “catches up with you”.’

Mr Power added: “When you see
what Australia has done (in relation to property prices) you have to ask
yourselves, you may be exceptional, but how exceptional are you?”

While prices of property in
Australia may continue to fall, the expert does not expect a crash.  This is because Australia boasts low
unemployment and has ‘real’ interest rates compared to the zero or even
negative rates in some countries.

“There’s more protection on
the downside here than the US or Spain or Ireland property burst,” he

It seems to me that the demand for property in Australia
remains strong and so I don’t expect to see any major price correction.  Prices have gradually fallen over the
last couple of years and may have further to go, but the stable Australian
economy should ensure no major crash.”

Author:  Nick Marr

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