API Victorian president Chris Plant said there is no evidence that housing values are about to collapse by 40% as suggested recently by University of Western Sydney Professor Steve Keen.
He pointed out that the conditions are currently in favour of the market with 40-year low interest rates, government handouts and incentives by developers.
In Melbourne he said the residential property market is made up of many sectors which are influenced by different factors.
“Whilst the high end of the market in areas such as Stonnington and Glen Eira have declined in excess of 20% over the past 12 months, many of the growth corridors have remained in positive growth.
“The government incentives rarely effect the locations where median house prices are greater than $500,000, in the same way that the falling stock market has not impacted the lower end of the market,” he added.
“What is significant is at the end of 2007 areas such as Stonnington, Bayside and Boroondara all had median house prices in excess of one million dollars; 12 months later not one of these areas retains a million dollar median house price.
“To apply broad percentage changes across diverse property locations and then suggest that the market will collapse by 40% on current data is, inflammatory, and has no historical precedent,” he continued.
According to Herron Todd & White Director Tony Kelly, the credit crunch has seen lenders tightened their lending criteria and property markets across the country have been noticeably impacted by the unprecedented crash of global financial markets.
“In these conditions, a few months is a long time in residential real estate,” Kelly added.
Plant concurred that there has been a significant decline in the number of sales transactions occurring by comparison with the peaks of 2007, it is crucial that financial decisions are based on market evidence and are regularly updated.
Plant said first time buyer activity, which has been rising for the past three months, leapt to a new all time high of 25.8% for December which is evidence that the Federal and State incentive programmes are working, and will have a positive impact on construction jobs in 2009.
He added that API data has revealed a 10.9% decline in the median house price in the Melbourne metropolitan area.
Plant conceded that key factors that will impact on the future of house prices, consumer confidence and employment are critical indicators for the residential market.
“Naturally, if Australia falls into recession, which is now a very real possibility there is potential for further price corrections, but no where in the vicinity of the 40% predicted by some pundits,” he concluded.
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