Up or down? Where are property prices heading into 2011?

Debate continues to rage over the state of Australia’s property markets, with experts and industry commentators asking questions like; are we experiencing a property bubble? Will affordability and the rising cost of housing fuelled by mounting interest rates cause a market meltdown? Where are prices heading into 2011?

But with general economic conditions still holding the balance of power when it comes to things like interest rates and employment – two fundamentals that will make a significant difference to housing values over the next year – it’s unlikely that these questions are going to be answered with an emphatic yes or no any time soon.

A recent report from Smart Company revealed that while the International Monetary Fund is cautioning that Australian house prices are overheated by as much as 10%, largely due to the commodities boom as a resulting influx of capital, research group Australian Property Monitors argues this figure means nothing as long as homebuyers can keep up with mortgage repayments.

APM economist Andrew Wilson, says rising employment will continue to buoy the property market even though they expect price growth to remain stagnant into 2011.

“It’s a good time to be a buyer right now, but this won’t last because capital markets are strong. The momentum in the market always turns at some point,” he says.

The IMF report claims the current mining boom and things like the First Home Buyers Grant have inflated prices by between 5 to 10%, adding that any correction will be “orderly” and will not cause any dire impact on our banking sector.

It says, “From a financial stability perspective, stress tests suggest that a correction in house prices is not expected to take a toll on banks because of the low level of high-risk mortgages.”

“The current historically high terms of trade are expected to be long lasting. Strong population growth and high real income growth in the wake of record-high commodity prices this year will continue to support house prices.”

Although Wilson concedes that property prices are beginning to flatline, with stock flooding the market and decreased buyer activity, he says this is a temporary period of correction that will turn around as more full time jobs are created and finance increases.

“We’re having a shift in property at the moment. There’s been a pause here, a correction, people are taking a wait-and-see approach and we have a lot of stock being offered,” says Wilson.

“There are various reasons for that. The lengthy election campaign, a drawn grand final in Melbourne, and perhaps people were thinking about whether now was the right time to buy or sell. So what we are seeing here is a sentiment driven market, not a market driven by fundamentals.”

“It’s all about momentum. We are going to see more full-time jobs, which means higher income levels, and that will move back into the property market, and that will impact prices as well.”


Subscribe & don’t miss a single episode of Michael Yardney’s podcast

Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.

Need help listening to Michael Yardney’s podcast from your phone or tablet?

We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.


Prefer to subscribe via email?

Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.

Michael Yardney


Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au

'Up or down? Where are property prices heading into 2011?' have no comments

Be the first to comment this post!

Would you like to share your thoughts?

Your email address will not be published.


Michael's Daily Insights

Join Michael Yardney's inner circle of daily subscribers.

NOTE: this daily service is a different subscription to our weekly newsletter so...