QUT’s professor of property economics, Chris Eves says that a consistent decline in home sales listings and sales plus rising interest rates will keep the Brisbane property market in the doldrums for the first half of 2010 and bring mortgage stress for those who bought houses in 2006 and 2007.
“In fact, the middle-value (between $400,000 and $550,000) and lower-value housing prices are stagnating,” Professor Eves, from QUT’s School of Urban Development, said.
“The most significant fall in the number of residential property listings has been in the townhouse/unit markets which have recorded a fall in average weekly listings of 18.5 per cent since February this year while house listings fell 10.4 per cent in the same period.”
Professor Eves said the fall in listings was uneven across the high, middle and lower-value suburbs of Brisbane but indicated many people were uncertain and holding back from moving up.
“Instead of moving up they are cutting debt or adding or improving what they have got,” he said.
“Middle and higher-value suburb units/townhouses have shown the greatest falls of 27.3 per cent and 23.8 per cent respectively indicating that even though there were fewer residential developments in 2009 there has not been the demand to push prices up,” he said.
“In contrast, the fall in listings for units in lower-value Brisbane suburbs has been only 2 per cent, indicating the first-home buyer incentives had a significant impact on this sector.
“Since the reduction of that incentive scheme, however, lower-value units’ listings have fallen by 4.7 per cent and lower-value houses by 10.6 per cent – so fewer first-home buyers want to test the waters.”
A drop in sales was adding to the gloomy picture.
“The percentage of sales to listings in November 2009 compared with February 2009 has fallen from 24.6 to16.2 per cent in lower-value suburbs. For the middle-value suburbs there was a similar fall from 25.5 per cent to 16.6 per cent but for the higher value suburbs there has been a spectacular drop from 17.4 per cent to 7.2 per cent.”
Professor Eves said many people who had bought houses in 2006 and 2007 and borrowed over 85% of the purchase price, would experience mortgage stress as interest rates rise because the value of the house was 10 to 15 per cent less than when they bought it.
“These home owners got through 2008 and 2009 thanks to artificially low interest rates. Because they have been able to maintain payments there has been no pressure from the bank even if the loan was interest only. But once interest rates start rising to 8 or 9 per cent by 2011 the banks will start moving in if borrowers default.”
(source)
