City house prices flatline, but freefall not likely

Article Category: Property & Housing

By By staff writers, From: news.com.au, 29 October 2010

AUSTRALIAN house prices have virtually flatlined in the second half of this year, but those hoping for a sudden drop in the price of houses could be waiting a while, experts say.

Capital city home values have not risen since May this year, while houses in the rest of the states have not posted growth since December last year, the RP Data-Rismark home value index shows.

RP Data's senior research analyst Cameron Kusher said the middle of the year was typically a much slower time for sales activity.

"Following on from these soft conditions there is little to suggest there will be any significant rebound during spring," he said. "We expect relatively flat growth in property values for the remainder of the year."

While Sydney values rose by 0.8 per cent, Melbourne values increased by 0.7 per cent as Perth values plunged by 5 per cent in the three months to September.

Canberra recorded the largest growth of 1.9 per cent in the third quarter.

Over the period, Brisbane values fell 1.4 per cent, while Adelaide and Hobart were down 0.6 per cent, and Darwin values fell 0.3 per cent.

Rismark managing director Christopher Joye said the 2010 results had "panned out exactly as expected" with a strong start to the year followed by little-to-no growth in the second half.

"Our analysis suggests a substantial increase in rates would put downward pressure on dwelling prices," he said.

No bubble here, says Westpac

While growth has stalled, the prospect of a sharp fall in house prices is highly unlikely, Westpac's chief economist says.

Rather, house prices will remain broadly steady over the next two years because of higher interest rates.

"Bubbles are things that emerge quickly and burst," Bill Evans told Melbourne's ABC774.

"If this level of high prices has existed since 2003, and given that the Australian economy has been subject to some extreme shocks during that period, if it was a bubble it would have burst by now," he said.