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 "The property market tide is in ebb. The introduction of new taxes for NSW investors has added additional pressure to an already slowing Sydney property market." - Mark |
| Talk of housing crash is dashed |
| By Bina Brown |
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June 02, 2004 WHILE the outlook for residential property might be looking decidedly rocky, a full-scale crash is considered unlikely. According to Macquarie Bank's Rod Cornish and Richard Gibbs, property crashes -- when house prices fall 23-35 per cent -- share the same triggers as a recession, which are not on the horizon. It's time to start worrying when interest rates rise significantly, prices jump considerably, economic growth peaks and then declines suddenly, demand for migration drops, unemployment rises and there is a sharp deterioration in private balance sheets. Even in Sydney where house prices remain the highest and riskiest investment, affordability is reasonable compared with 20 years ago, according to Macquarie. Cornish says that 60 per cent of wages were required to afford a Sydney home in the 1980s, compared with 36 per cent of wages needed today. Perth houses are among the most affordable, with an average house financed at 19 per cent of wages. In Brisbane it takes about 26 per cent of wages and in Melbourne it takes about 29 per cent of wages. In the apartment market, Macquarie predicts that generic undifferentiated units, especially in oversupplied locations and with no location value such as a beach or harbour, will be the hardest hit this year and next. "The message is clear: avoid locations and types of property for which oversupply is, or will be, a problem," says Macquarie. In the apartment construction market, owner-occupier and investors should be focusing on property that is difficult or impossible to replicate and is priced at reasonable levels relative to existing comparable apartment buildings. As an alternative to residential investments, Macquarie is predicting strong growth from the office, retail and industrial sectors. With most of these non-residential alternatives beyond the reach of individual investors and some super funds, another option is to invest through listed property trusts, which Macquarie forecasts will return 11.3 per cent in 2004. Reference: The Australian 
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