Dire prediction for property prices

Adam Smith 17 October 2016

falling house price signA mooted crash for apartment prices could make property the “worst investment”, an economist has claimed.

Deloitte Access Economics economist Chris Richardson has told the Australian Financial Review that apartment over-building coupled with interest rates that are certain to rise again at some point in the future could lead to a dire outcome for property prices.

“There’s an increasing risk that it becomes the worst investment in the next few decades. That might happen fast or slow. But every policy maker should pray that it happens slow,” Richardson told the AFR.

He predicted that the apartment sector would see “a shakeout” due to a glut of supply. But he argued that the looming fallout for apartments would spur developers to rush projects through to completion, the AFR reported.

High risk for Aussie housing

“If you are building apartments now you want to sprint, absolutely get across that finish line and flog yours as fast as you can, leaving problems for those coming down the track,” Richardson said.

According to Richardson, the run-up in property prices has not been due to high demand and lower supply, but low borrowing costs.

“As the cost of money has gone increasingly close to zero, the cost of housing has increasingly gone atmospheric. At some stage, interest rates will be a chunk higher than they are today. That does mean housing prices in Australia have to live through a very long period of headwinds,” he told the AFR.

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