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Housing costs limiting growth
October 12, 2008 11:30pm Article from: The Advertiser
THE global credit crisis is conspiring to keep residential investors away from the market.
South Australia's Valuer General announced this weekend that Adelaide's median house price dropped 2.17 per cent to $361,000 in the September quarter.
While cheaper housing would normally attract buyers to a sector, KPMG partner Steve Gatt said residential investment remained ``a major conundrum''.
``We've got 300,000 people coming to Australia every year and we've got continuing declines in the average number of people per household,'' he said.
``The banks are asking the developers to get pre-sales sufficient to cover construction funding, but no one is willing to pre-commit, so there is no new stock being delivered to the market.
``Demand's going up, supply's coming down and, as a result, rents are going up. Normally you'd associate rents going up with property prices going up - investors will start coming to the market - but that's not happening because we still have a problem with affordability.
``Until that affordability index gets back to normalised levels and developers can actually start achieving pre-sales to satisfy the banks - and the banks no longer have their liquidity problems - that's when the residential conundrum will be able to get back into equilibrium and start to deliver
to the market.''
The warning comes after Friday's historic share plunge. KPMG banking head Andrew Dickinson said shares would continue their downward fall until buyers showed some confidence.
``As soon as the confidence comes back and people don't think we're on a steep escalator downwards, the buying will return and there will be some recovery then,'' he said.
``A month ago I was pretty confident that we'd see some return to normality by the end of the first quarter next year but what's happened recently has pushed that back at least a couple of months.
``I would think by the middle of next year we'd be starting to see some return to normality.
``It will probably take a couple of U.S. quarters of reporting without any surprises or epic failures before that happens.''
However, Mr Gatt thought property markets were yet to show the full impact of the slide.
``Equity markets react quickly because it has liquidity in the markets, but, sadly, property markets don't quite get there as quickly,'' he said.
``It's only when it gets back to market that they can actually trade the asset. If you've got your asset down to 100 and the market really is moving more towards 80, you don't want to bear that loss when the markets move south again.
``I think it will be much more drawn-out on the institutional
front of the market.'' |
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