According to a poll of 237 property professionals, House prices in Australia are now expected to fall in 2011. NAB conducted the survey from a pool of expert respondents including real estate agents/managers, property developers, fund managers and owner/investors.
They expected property prices will not only fail to keep up with inflation, they will actually fall a modest 0.5 percent. These results come after Residex published data last week showing house prices in Australia fell 1.1 percent in the December 2010 quarter, suggesting a 0.5 percent fall could be on the light side.
“There has…been a significant downward revision in house price expectations over the next 12 months,” said National Australia Bank chief economist Alan Oster. “The house price expectations of our survey respondents have been downgraded significantly from our previous survey.”
Demographia has just released the results of its 7th Annual International Housing Affordability Survey. It compared house prices to household income in 325 cities around the world and found Hong Kong had the most expensive housing followed by Sydney in 2nd place and Melbourne 4th place. The report noted “Australia’s major markets have a severely unaffordable Median Multiple of 7.1, nearly 2.4 times the 3.0 affordability standard. Each of the major markets, with the exception of Sydney had housing affordability within the 3.0 norm during the 1980s.”
This abnormal increase in House prices since the 1980’s has seen household debt surge with banks having to go off shore to get more funding to fuel our appetite for housing. Ratings agency Finch reports the ratio of Household debt to disposable income in Australia is 159 percent, more than the levels in the US, UK and Spain at the top of their housing bubbles. Fitch says Australia’s reliance on external wholesale funding is a key vulnerability, but believes our banks will be able to manage a severe downturn. “Even in a severe downturn, gross losses incurred by the four major banks in their mortgage portfolios would be manageable,” said John Miles, senior director at Fitch Ratings. A 40 percent drop in Australia house prices was used to model the “severe” downturn.
» House prices to ease in 2011: NAB survey – The Sydney Morning Herald, 25th January 2011.
» House price expectations turn negative – The Australian, 25th January 2011.
» 7th Annual Demographia International Housing Affordability Survey: 2011. – Demographia, January 2011.
» Lenders to weather housing slump, says Fitch – The Sydney Morning Herald, 24th January 2011.