Experts are struggling to know where the property market in Australia will head in 2010. Like other countries such as the United States, Canada and other European nations some experts predict a drop of more than 20% in property prices, whereas others predict an increase of between 5 and 8%.
The main determining factor that will affect property prices will be unemployment. If the unemployment rate continues to rise then it will be only people with deposits that can afford to buy real estate and new builds and many predict that the unemployment rate will soar to as high as 8%, compared to 2008 when the unemployment rate was 4.5%.
Back in 2008, the Australian Reserve Bank cut interest rates by a massive 3% which helped many people meet their mortgage repayments and the new strict lending rules, issued by the Australian Government has significantly cut down on the amount of mortgages given to people who would struggle to meet their repayments.
These stricter lending rules have cut down on the amount of repossessions on the market which has enabled the property market to remain fairly stable throughout the last few years.
To help first time buyers get onto the property ladder, the Australian Government now offers first time buyers a grant, however this is only really beneficial if people are able to keep up with their mortgage repayments.
Debt levels are at an all time high in Australia, with more and more people borrowing from banks and credit cards to keep their heads above water. To purchase new properties or new builds will mean taking on extra debt which they obviously can’t.
Many home owners are having a hard time paying their debts and many have lost their full time jobs and are now working only part time. Part time jobs increased by over 40.000 in 2008, whereas full time jobs dropped by 44.000 in the same period.
Other countries such as the USA, Japan and other European nations are all suffering a recession and even the big player, China has seen a significant slowdown. The world economy is another determining factor and as with other countries, Australia will not be spared.
The property market in Australia, although predicted to be generally weak in 2010, should hold out fairly well in the first 6 months or so, however it will be the employment issues that will be the deciding factor as to where the property market heads in the next few years or so.
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