House prices to fall, rents to rise
In its latest economic overview released today, Westpac says although house prices have dropped 3% from the 2007 peak (dropping 12% when taking into consideration inflation decreases), they still have further to fall due to tax changes making property a less attractive investment.
It says tax changes will knock 14% off the fundamental value of residential property in the short term, but it only expects to see values decline by less than a third of that amount.
Impending tax changes, rising interest rates and slowing population growth "will reduce the fundamental value of houses, creating a renewed reason to expect ongoing price weakness," says Westpac.
Sales have been subdued this year, a solid indication that prices will continue to decline gently through to about September, Westpac says.
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