More predictions for apartment crash

Adam Smith 19 October 2016

The block 2015 what to consider when buying and renovating an apartmentYet another economist has predicted a coming crash for the apartment market.

Australian Institute of Company Directors economist and former chief economist for JPMorgan Stephen Walters has claimed apartment prices are set to fall by 10-15%, the Australian Financial Review has reported. Waters told the AFR the apartment market will see the declines over the next one to two years, and that negatively geared investors are likely to be hit particularly hard.

"I think it's going to get ugly, particularly in some parts of the market and for some lower-income cohorts who have borrowed,” Walters told the AFR.

Walters said declining rents were signalling a downward trend in the apartment market.

“Rents are already off, and given that a large part of the market is investor focused, that’s got to affect your price expectations and purchasing prices,” he said.

The downturn has likely been exacerbated by the Reserve Bank’s rate cuts, Walters told the AFR, as borrowing costs have fallen to record lows.

“They knew this would happen. They engineered this part of the boom. When interest rates go down, housing will pop. And they’ve had to keep cutting through gritted teeth because they’re making the adjustment and shakeout in housing and balance sheets that much worse,” he said.

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