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Property price gains expected to slow

  • 29-07-10

Australians are expecting a slowdown from last year's breakneck property price growth to continue over the next 12 months.

NAB's quarterly residential property survey found expectations of annual property price growth have slowed from 5.2 per cent in the March quarter to only 1.4 per cent in the June quarter survey.

That is well below residential property price growth of around 12 per cent last year when low interest rates and the First Home Buyers Boost were inflating the market.

The bank's survey of 248 real estate agents, developers, fund managers and property owners shows the biggest fall in expectations has been for Melbourne which, according to RP Data figures, recorded a home price boom of almost 20 per cent in the year to March 2010.

The NAB survey shows expected annual property price inflation in the nation's second largest state capital dropped from 5.8 per cent in the March quarter to only 0.7 per cent in the most recent results.

Canberra property is now expected to have the biggest price increases over the coming year of 2.9 per cent.

The survey respondents expect homes in the lower price range of $250-500,000 to record the biggest price increases, while houses and apartments over $2 million are expected to fall in price.

Those surveyed expect existing Australian resident owner-occupiers to make up just under half of the market for residential property, while domestically-based investors were expected to account for 29 per cent of buyers, and first time purchasers are forecast to make up just 13 per cent of the market.

The first home buyer segment has shrunk dramatically since peaking at nearly 30 per cent when interest rates were 3 per cent and the First Home Owners Boost was providing $21,000 grants to new home buyers and $14,000 grants to purchasers of existing dwellings.

The most recent housing finance figures showed that first time purchasers made up about 16 per cent of loan approvals.

Overseas buyers were expected to make up 9 per cent of the residential property market.

Rental growth was expected to remain moderate with an average expectation of 1.9 per cent growth over the next year.

Rising interest rates were seen as the biggest hurdle to buying existing residential property, while the lack of credit availability was nominated as the biggest hurdle to new developments, followed by interest rates.

By online business reporter Michael Janda. www.abc.com.au 


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