Home prices in the country have been on an upward trend since 2000, but it looks like the tide is finally turning. On a national scale, house prices have fallen a little bit from last summer. Houses in Sydney and Melbourne have decreased as much as 4.5%.
According to top economists, the dip in house prices has been long overdue. The changes are even seen as a signal that the boom time is over. Houses in the country have been priced higher than what is deemed sensible by way of valuation for some time, after all.
An Expected Drop
Over the past five years, the market has seen prices of homes across the country surging. This has been the result of historically low-interest rates, which has encouraged many Australians and investors to cash in and load up on debt.
Since that surge, house prices are beginning to dip, especially in Melbourne and Sydney where the prices reached record highs. According to the latest business outlook by Deloitte Access Economics, the house prices in those key cities are falling by over $1000 a week.
A Sign of a Housing Market Crash?
A drop in house prices can typically damage the economy, but Australia’s case may be slightly different. Given that the fall has been mild and the country’s economic growth continues to accelerate, economic experts have assured that there isn’t anything that first-time homebuyers and foreign investors need to worry about.
While recent reports indicate that house prices may continue to fall, investment firms believe that a housing market crash is unlikely. The prices aren’t falling at a dangerous rate. As some economists suggest: the prices are simply shifting to a safer territory.
Factors Behind the Dip in House Prices
Ron Cross, CEO of ParkTrent Properties Group, points out that banks have been more cautious lending money to home buyers. Major banks and lending institutions have been putting more credit restrictions, which makes it more difficult for anyone to get sufficient funds for buying properties.
He adds that international property investors have been more cautious in investing in the country’s real estate. With foreign buyers spending more for Australian properties, many have been less aggressive in their investment approach.
Both of these scenarios have become the driving force behind the drop in house prices across the country.
A Window of Opportunity
A major upside of having house prices drop is that it gives many Australians a chance to finally become homeowners. The situation certainly opens up a great opportunity for those who have been saving up for a house over the last couple of years.
This window of opportunity may be short-lived, though. Ron emphasises that prices of construction material and labour are going up lately. In a few years, house prices could reflect such increased cost soon enough.
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