Housing market peak predicted for 2008

By Nila Sweeney | 29 Jan 2008

The first half of 2008 will see the Australian property market reach a peak due to official interest rate hikes, tightening credits markets and the uncertain future of the economic and business sectors, according to RP Data.

Most capital cities experienced an increase in property values in 2007, with national growth rates reaching 12.5% in November - almost double the rate of growth at the same time in 2006.

RP Data has predicted this trend will taper off in 2008 and cited several factors that are likely to cause a housing market peak in 2008.

"It's rare for a property market to 'crash'. Rather, growth is typically controlled," said Tim Lawless from RP Data.

"We see no reason why this wouldn't be the case during this cycle also. This merely means that national growth in property values will taper back to more sustainable levels during the second half of 2008, [and] by the end of 2008, national growth rates are likely to be 9-10%."

Lawless said inflation rates are likely to cause the Reserve Bank of Australia (RBA) to lift the cash rate in the first quarter of the year, which will cause housing affordability to further decline.

With banks acting independently of the RBA to raise interest rates outside of an official rate rise, consumers are also beginning to lose confidence in the market and think twice before taking out new loans.

In addition, the ongoing threat of a US recession has increased fears of a decrease in the demand for Australian resources, which has spread to the share market, putting an altogether dampening effect on the Australian economy.

Lawless predicted that the combination of these factors will cause the Australian national market to peak at 13-15% growth in the first half of 2008, which in turn will cause national property values to cut back to more sustainable levels in the second half of the year, with an overall growth rate of 9-10% at the end of 2008.

Adelaide is marked to be the best performing capital city in 2008, due to its high level of affordability and the growing amount of resources-related activity in South Australia.

Sydney is slotted to keep its below-average growth rates as the most unaffordable city in the nation, while Darwin's growth rates will likely be above average, with its diverse economy creating high demands for housing.

Both Brisbane and Melbourne are expected to experience solid, above average growth rates, with Perth's housing market to remain quiet and Canberra to continue its cooling trend.

Top Suburbs : keperra , marrickville , coorparoo , dulwich hill , lockridge


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