MELBOURNE:- “House prices are falling in Melbourne faster than US prices did when that property bubble burst,” Prosper Australia Campaign Manager David Collyer said today.
“The enormous housing oversupply and sudden buyer caution have dramatically switched the Australian trend. Anyone standing aside from the market will have saved themselves an average $50,000 – plus a small mountain of interest charges.
REIV data released Friday shows Melbourne house prices have fallen 8.3 per cent from their peak in the December 2010 quarter.
The S&P/Case-Shiller US National Index peaked at 190.94 in first quarter 2006 and only retreated 1.01 per cent in the first year. By second quarter 2011 US prices had fallen to 129.19 – down 47.8 per cent over 21 quarters.
“The calling of the bubble burst by Prosper in March 2011, our Don’t Buy Now! Home Buyers Strike campaign and repeated warnings that land prices are unsustainable have proved correct.
“We restate our forecast for a 50 per cent fall in land prices over about six years, of which nearly a year has already gone. This correction would merely return land prices to their long term trendline. Prices may well overshoot this measure on the downside.
“Prosper has been criticised for talking down the housing market – the single largest investment made by most households and a very significant employer. We say, high land prices are a much greater threat to national prosperity than this painful and costly correction.
“Young Australians faced a terrible dilemma: buy at these painful prices and devote their entire working lives to giant mortgage repayments or stand aside and become second-class citizens in a property owning democracy.
“The next down-leg of this market will be driven by negative gearers liquidating their loss making investments. They are waking up to the harsh reality negative gearing makes no sense in a falling market.
Prosper does not expect the RBA to cut interest rates until the new down price trend is set in concrete.
Media comment: David Collyer firstname.lastname@example.org
About Prosper: Prosper Australia is a tax reform lobby group and think tank that is now 120 years old. It seeks to move the base of government revenues from taxing individuals and enterprise to capturing the economic rents of the natural endowment, notably through Land Value Tax and Mining Tax.