Housing boom coming to an end: Propell

The property market is displaying all the typical signs of a slowdown, according to Propell National Valuers.

Citing increasing unemployment levels and federal budget expectations, national research manager Linda Phillips says that housing demand is likely to drop.

“Forget the past. It is now May and the market faces headwinds in the form of the traditionally slower winter months, the painful federal government budget and rising unemployment”, said Phillips.

“Any impetus from the declining interest rates of last year has now worked through the market. The federal budget is likely to impact badly on consumer confidence and strip demand from the market which may need a further lowering of interest rates to restore spending.”

This is contrary to the expectations of many high profile economists and commentators, many of whom predict that interest rates are likely to rise before the end of the year. 

According to Propell, increasing property listings this month will be “trading in the face of negative headlines about what the federal budget might include,” and, after May 13, adjusting to the announced budget.

Propell National Valuers itself notes that it was “first to highlight the risk of the abolition of negative gearing in the budget”, but that it appears now that “the housing market itself will not be the subject of direct attacks in the budget.”

However, the company’s researchers do not rule out the possibility of other housing related adjustments in the federal budget. But the greatest budgetary impact on the housing sector will come from the expected reduction in government spending, tax increases and employment levels, according to Propell. The property research firm expects that tightening measures will increase unemployment through the reduction of the public sector and soften consumption, leading to a decrease in real estate demand. It predicts that some states will see median price reductions through the winter months.