economist says apartment market 'gone' Economist says apartment...

economist says apartment market 'gone' Economist says apartment market 'gone'
15:56 AEST Wed Apr 13 2005


Investors in residential apartments could be forced to sell their apartments at a heavy discount as interest rates rose more than expected, the chief economist of economics researcher and forecaster BIS Shrapnel has said.

At a property forum conducted by the Australia-Israel Chamber of Commerce, Frank Gelber said he was expecting a substantial rise in interest rates far greater than the extra 25 basis points anticipated by analysts.

"We think interest rates will go up two to two-and-a-half per cent before this is over," he said.

"Remember: the market thinks there is a maximum quarter per cent in it now and then we don't have to raise interest rates again, ever - rubbish!

"We'll see inflation, and when we do, the Reserve Bank will tighten monetary policy significantly, probably starting the tail end of this year and certainly through next year. That will happen."

In this environment, Dr Gelber said he expected the residential property market would be "gone for about four years" as the urgency to buy a house disappeared.

He said the real damage coming out of the investor sector of the market - inner-city apartments in Melbourne, for example - was yet to be seen.

"We've still got a lot of stock coming onto the market, there's no demand for it, and so if you want to sell your stock you have to discount it heavily," he said.

"And that damage we are yet to see. All those people that bought residential land or sites for building residential units, they won't have any cashflow for a while, so if the banks get nervous, they'll foreclose.

"And we will see a lot more of that happening over the next few years."

But he said the residential market would be strong coming into the next decade.




©AAP 2005