http://www.theaustralian.news.com.au/common/story_page/0,5744,12223084%5E25658,00.html
Apartment prices likely to slide as interest rate hike looms
Anthony Klan
February 12, 2005
APARTMENT prices in Melbourne and Sydney could fall by a further 10 per cent this year as the Reserve Bank gears up for further interest rate rises.
Despite the announcement yesterday of a 1.2 per cent rebound in housing finance in December - led by a 2.9 per cent increase in borrowing for investment property - the apartment market is expected to soften further as investors come to grips with looming rate rises.
Australian Property Monitors director Louis Christopher said renewed warnings from the Reserve Bank of a rate rise meant a turnaround in investor sentiment would likely be seen at auctions as early as today.
He said the market expected rates to rise by half a percentage point this year, which would likely lead to a drop in apartment values across the nation of between 5 and 7 per cent, with values in inner Melbourne and Sydney expected to fall by as much as 10 per cent.
"We've never had a situation before where the Reserve Bank has lifted rates in a market which is already declining," he said. "We don't know exactly what is going to happen, but we're very sure we are going to see further price falls."
AMP Capital Investors chief economist Shane Oliver said housing loans to investors had rebounded by 15 per cent since October, which meant the housing bubble was beginning to reinflate.
"It looks like the shock of the November and December 2003 interest rate increases has long worn off as far as homebuyer sentiment is concerned," Mr Oliver said. He said any move to increase interest rates would quickly take pressure off the housing market.
Premium property - long held to be the shining light in the softer market - is now also beginning to show signs of weakness.
This week it was announced an $80 million Sydney CBD apartment project, Dakota - which was to offer Manhattan-style apartments priced between $3.5 million and $10 million - had been scrapped.
But despite the problems in the apartment market, rents are expected to increase on the back of falling vacancy rates.
APM's Louis Christopher said rents would rise by more than 5 per cent in Sydney this year, with rises in other cities expected to be more moderate.
Apartment prices likely to slide as interest rate hike looms
Anthony Klan
February 12, 2005
APARTMENT prices in Melbourne and Sydney could fall by a further 10 per cent this year as the Reserve Bank gears up for further interest rate rises.
Despite the announcement yesterday of a 1.2 per cent rebound in housing finance in December - led by a 2.9 per cent increase in borrowing for investment property - the apartment market is expected to soften further as investors come to grips with looming rate rises.
Australian Property Monitors director Louis Christopher said renewed warnings from the Reserve Bank of a rate rise meant a turnaround in investor sentiment would likely be seen at auctions as early as today.
He said the market expected rates to rise by half a percentage point this year, which would likely lead to a drop in apartment values across the nation of between 5 and 7 per cent, with values in inner Melbourne and Sydney expected to fall by as much as 10 per cent.
"We've never had a situation before where the Reserve Bank has lifted rates in a market which is already declining," he said. "We don't know exactly what is going to happen, but we're very sure we are going to see further price falls."
AMP Capital Investors chief economist Shane Oliver said housing loans to investors had rebounded by 15 per cent since October, which meant the housing bubble was beginning to reinflate.
"It looks like the shock of the November and December 2003 interest rate increases has long worn off as far as homebuyer sentiment is concerned," Mr Oliver said. He said any move to increase interest rates would quickly take pressure off the housing market.
Premium property - long held to be the shining light in the softer market - is now also beginning to show signs of weakness.
This week it was announced an $80 million Sydney CBD apartment project, Dakota - which was to offer Manhattan-style apartments priced between $3.5 million and $10 million - had been scrapped.
But despite the problems in the apartment market, rents are expected to increase on the back of falling vacancy rates.
APM's Louis Christopher said rents would rise by more than 5 per cent in Sydney this year, with rises in other cities expected to be more moderate.
