Analysts believe that the drop in auction clearance rates in Australia are showing that prices will fall in the second half of the year.
The property market has begun to relax over the last couple of months. Consumer confidence declined 7% in May and the interest rate rises have finally started to have an impact.
First Home Buyers have abandoned the market in droves and the number of new mortgages is at its lowest level in almost a decade and the number has continued to drop every month this year. Banks have already tightened their lending criteria and those seeking loans now have more hurdles to jump.
Auction clearance rates dropped under the 60 per cent mark in Sydney and Melbourne last weekend. “There is a correction starting to take hold in certain parts of the country,” said Sydney-based SQM Research director Louis Christopher.
“Overall in the second half of this year, it’s likely the Australian Bureau of Statistics is going to record a fall in house prices for the September and December quarters, unless we have a cut in interest rates.”
“In terms of actual price, there will be some regions where prices may already be falling,” said APM chief economist Matthew Bell.
Recently announced is the news that stamp duty in NSW will be slashed to zero for all new properties bought off the plan from 1 July 2010. Over the next two years both home buyers and investors will have the opportunity to save up to $22,490 in stamp duty if they buy a property worth up to $600,000 in the pre-construction phase. The program is dubbed to the NSW Home Builders Bonus scheme. Seniors aged over 65 would also qualify for zero stamp duty if they sold their residence to buy a new property.
The effect of this announcement will, however, take a long time to materialize. After all, developers have to first lift the numbers of new dwellings before potential-buyers can purchase! ”Australia needs to build over 190,000 dwellings in 2010 alone to meet underlying demand and over the next ten years we need to build 420,000 dwellings more than we built over the last decade,” said HIA chief economist Harley Dale. The chances of this are highly remote.
Finally, as quick as changes were made to foreign ownership of Australian properties, the law has changed once again. The new rules bring into place tough new civil penalty, compliance, monitoring and enforcement measures on the back of foreign purchasers and real estate agents that have allegedly flaunted the laws.
The measures mean that foreign non-residents can only invest in Australian real estate if that investment adds to the housing stock, and that investments by temporary residents in established properties are only for their use whilst they live in Australia.
All temporary residents seeking to purchase an existing property in Australia will now be brought within the Foreign Investment Review Board (FIRB) notification, screening and approval process.