House prices are expected to fall, according to a leading economic expert. Michael Power from Investec Asset Management has said that the prices of property in Australia have dropped over the last two years by 6%, and he believes they are going to be dropping further over the next 18 to 24 months. He based his forecast on data in the Economist Property Index which revealed Aussie home prices were keeping company with the highest in the world and that it had been on its way for a while.
That means, for buyers who are waiting to pay off personal loans and credit card debt or saving up to finance a deposit, there are still likely to be deals around in the coming months. All we had to do to locate personal loan deal at the moment was run a Google search and land on the Bankwest homepage. It also means that people who want to sell may have to sit tight for a little while longer although, given amount of attention that is being paid to catching up with personal finances; it’s probably going to be a trend that agrees with most people’s budget plans for the short term anyway.
The August Economist said that the Australian property market was still priced at 3.6% higher than its real value. He said that the turn-around was simply a matter of prices dropping from all-time highs and literally coming down to earth again.
Australia has been partially protected from the precarious economic climate with low interest rates and low levels of unemployment but the market is starting to feel the ripple effects from surrounding economic uncertainties now. Power cautioned that if the market was to slide it would have a marked impact on Australia’s big banking four. ANZ, Commonwealth Bank of Australia, National Bank of Australia and Westpac are likely to be affected if this happens because they have borrowed foreign investment funds to finance mortgages in the market.
Australian household debt is also sitting at high levels and is expected to worsen if the property market goes further into decline. The current consumer behaviour has been labelled as conservative to say the least as retail sales have dropped and credit card debt growth has stagnated. Consumers these days are investing their cash, are trying to save and are investing a lot more money into paying off mortgages, personals loans and credit card balances.
Despite conservative buying, it appears that consumer confidence has lifted a little as a more positive outlook is emerging in the market. Westpac and the Melbourne Institute teamed up to measure consumer sentiment and found a 1.6% increase for the month of September and compensating a little for the dip in August. The index also showed a 1.3% improvement compared to September last year.
The survey was carried out between the third and eighth of September when consumer confidence would also have been affected by coverage of the mining sector’s job losses and production decline. Costs also continued to rise and commodity prices started to plummet.
The media coverage dominated other data that was reflecting second quarter economic progress and a reduction in employment to 5.1%. Respondents noted that unstable international and local economies were unfavourable. Responses about family finances however over the next year increased by 4.8% indicating a more positive consumer outlook. Confidence rose by 3.4% for the economic future over the next five years.
Property remains a sensitive topic as responses about whether now was a good time to look at buying property showed a drop of 0.4%. While the growth rate in consumer confidence had increased it is still below the 100 benchmark which means that are still more people with a negative perception of the economic times than those who are optimistic about the future.