News Service from House Harris

House prices fall, property market future uncertain: report

SYDNEY, Nov 11 AAP - A further weakening of economic growth would cancel the benefits of more affordable residential property made possible by recent interest rates cuts, an economist says.

A drop in property prices in the three months to September was largely the result of high interest rates before the Reserve Bank of Australia (RBA) began its latest round of rate cuts, Australian Property Monitors (APM) senior economist Liam O'Hara.

The rate cuts and an increase to the first home buyers' grant would lead tofurther improvements in affordability but the economic outlook remains uncertain, Mr O'Hara said.

"Dramatic reductions in the official interest rate as witnessed in early October and November will lift confidence and help stabilise property prices in the short term," he said.

"However, if economic growth continues to decline, feeding into significantly higher unemployment, then the outlook is less certain.

"Property prices and activity will drop and further official interest rate cuts may be needed."

APM predicts property prices to flatten or moderately fall in the next six months, providing further positive news for potential buyers.

"Only when potential buyers believe prices have fallen enough, and the economy gains upward momentum, will confidence return to more positive levels,"Mr O'Hara said.

APM's September quarter data showed median house prices fell in most capital cities, with Brisbane (5.2 per cent), Hobart (4.3 per cent) and Perth (3.4 per cent) recording the largest drops.

Sydney house prices fell 1.7 per cent, Canberra dropped 0.8 per cent and Melbourne remained flat.

Darwin and Adelaide both recorded gains in median house prices, adding 1.4 per cent and 1.2 per cent respectively.

Sydney remains the most expensive city, with a median house price of531,512 followed by Canberra at498,722.

Unit prices in all capital cities apart from Adelaide and Darwin also fell in the September quarter, APM said.

Over the past 12 months median prices for houses in Perth, Sydney and Hobart contracted, while there was growth over the year in Brisbane, Canberra, Melbourne, Adelaide and Darwin.