Macquarie Bank sees no Australian house price crash

Thursday 22 July 2004

SYDNEY: Australian home prices have peaked for this cycle but are unlikely to crash as unemployment and interest rates should both remain historically low, preventing forced sales, according to Macquarie Bank Ltd.

By The Landlord

Residential property prices could see further mild declines but the double-digit falls of 1989 to 1991, after mortgage rates soared to 17 per cent, would be avoided, said Rod Cornish, head of property research at Macquarie. Australian home loan rates are currently around 7 per cent.

"We're not expecting a typical recessionary house-price crash unless the economy turns unexpectedly down or unless employment slumps," Cornish told a gathering of the American Chamber of Commerce.

"Our economy is actually looking fairly solid," he said.

Residential property has captured the attention of investors after average house prices doubled in around six years, bringing household debt levels to a record high. The central bank raised rates twice in late 2003, which helped cool demand. Since then, rates have been left at 5.25 per cent.

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