Sunday, May 27, 2007

More countries feeling the housing pinch

values in Australian suburb halve in three years

The median house price in Sylvania Waters reached $1.54 million in the March quarter 2004 but was languishing at $767,500 in the March quarter this year, Australian Property Monitors figures show.

Sylvania Waters has also been home for the Reserve Bank Governor, Glenn Stevens, since 1993. Earlier this year he described his house - not on the waterfront - as "a piece of spec rubbish, built in the 1970s".

Mr Stevens has contributed to decisions by the Reserve Bank to lift interest rates eight times since 2002. Those policy moves have kept inflation in check, but they also helped drive down prices in many Sydney suburbs, including Mr Stevens's own.

warns on Irish housing market

The construction economist, Jerome Casey has warned that the current downturn in the (Irish) housing market could become a housing bust unless competitive issues in the economy are addressed through Government policy.

Mr Casey says structural difficulties in the economy, in relation to competitiveness, energy and healthcare, have been unmasked by the tailing off in the housing boom.

He is predicting house prices will fall 5% this year and by up to a further 10% in 2008, while house completions will drop to 62,000 per year over the next five years.

According to Mr Casey, unless the Government introduces policies to restore competitiveness, then the cyclical downturn in the property market of 2007 (and which is expected to continue into 2008) will turn into a 'structural housing bust'.

It’s not hard to see Australia falling into the same downturn patterns many other countries are facing.

While Australia cites rising interest rates as the chief cause of falling home values, Ireland points to government policy as being responsible.

It’s hard for an outsider to say what kind of action the Irish government might take to change the course of their market, but one thing is sure, more countries are now joining the chorus of pain.


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