House prices set for a positive turn

Property Observer

Although the pace of house price declines increased over the last six months of 2011, Residex CEO John Edwards expects the overall housing market to recover in 2012 and "exit a period of negative adjustment”.

Edwards says the price adjustments in 2011 were necessary, because markets were overvalued and affordability remained a problem.

This correction, he says, should ensure "we avoid the speculated housing ‘bubble bust'”.

"Our housing markets ended 2011 in a better position to where they started and I am confident that the year ahead will be better for residential property owners compared to last year,” he says.

He basis this view on the fact that in December 2010 house prices declined by 1.10 per cent while they only declined by 0.72 per cent in December 2011.

"Most owners should see their assets hold value or increase and this year could in fact be a good time for investor activity provided the world economy doesn't move into severe recession as a consequence of the problems in Europe."

According to Edwards, examining the monthly trend for house and unit prices in Australia over the past two years suggests markets are "exiting a period of negative adjustment”.

"However, in my view, we should not expect any rapid uplift in housing values because current economic conditions are not capable of supporting strong consumer activity. Retail activity during the Christmas period certainly suggests that consumers are cautious,” he says.

Looking at the monthly growth trends on a capital city basis shows that Melbourne, Hobart and Perth are improving while the Canberra, Darwin, Sydney and Brisbane markets are heading down.

The bottom line, according to Edwards, "is that we have achieved a good result, and it looks like an overall improving position may be the trend in the coming year.”

"Overall, the outcome for the year ahead will depend on interest rates, the eurozone crisis, inflation, the employment level and the carbon tax,” he says.

Edwards says even further housing price falls in 2012 would provide opportunity.

"Australians are much better placed than many other people in the world, and the adjustment period we have recently seen, with a clear upswing in our markets in the last few months, means that there is a reasonable chance that our markets will advance positively, albeit by a relatively small amount, in the current year,” he says.

"Additionally, in this situation there will be bargains for the astute house hunter along with quality growth in many suburbs,” he says.

This article first appeared Property Observer on January 18. Republished with permission.