Rates drive fall in house prices By Turi Condon April 30, 2008 02:00am Email article
Prices in Sydney, Perth, Canberra and Hobart fell Proof that rising interest rates has had an impact First widespread fall in prices in the past four years
HOUSE prices have fallen in half of Australia's capital cities, offering the first widespread evidence that interest rates are taking their toll on values.
In the three months to March 31, house prices fell in Sydney (down 0.4 per cent to a median of $550,890), Perth (down 0.3 per cent to $513,771), Canberra (down 0.4 per cent to $494,456) and Hobart (down 3.4 per cent to $268,773), according to researcher Australian Property Monitors.
Melbourne's previously buoyant residential market came to a screaming halt with growth of only 0.3 per cent compared with a 12-month price growth of 18.3 per cent.
"It's the first widespread fall in four years," said APM general manager Michael McNamara. "It seems to have all stopped on a 10 cent piece."
Adelaide turned in the biggest price increase for the quarter at 3.1 per cent to $411,885, while Darwin recorded a 2.7 per cent rise, taking its median house price to $463,560.
Signs of the slowdown have escalated this year with lending for housing falling and new home building weak.
Last week, the Real Estate Institute of Victoria said Melbourne's median house price fell 8.4 per cent over the March quarter.
The REIV, a real estate agents' industry body, had a far more bearish view than APM, which found Melbourne's house prices static at a 0.3 per cent increase.
Mr McNamara said there were other signs of weakness, with the number of houses for sale rising 39 per cent from 180,000 in February last year to 247,000 in February this year.
"A lot of sellers are sitting on their hands, holding out for a price, but there are also quite a number of distressed sellers adding to the volume on the market," he said.
The residential market was likely to be sluggish throughout the year, he said.
In Perth, APM forecasts price falls of 10 per cent or more in some suburbs this year.
Not all researchers are gloomy, with economic researcher BIS Shrapnel recording fewer falls and slightly bigger rises for the quarter based on the sales figures of agent LJ Hooker.
BIS Shrapnel managing director Robert Mellor said a worst-case scenario would be small declines over the next six months. "We won't see price falls of any magnitude," he said.
"There is a massive shortage of housing developing."
Rental vacancies were at record lows and rents were "going through the roof", resulting in pent-up demand for housing, he said.
Over a two- to three-year period, Mr Mellor expects housing prices to rise with growth of 5-7 per cent a year in Brisbane after the pause, and Sydney recovering in 2009-10 with 4-5per cent growth.
