A hike in interest rates could be terminal for house prices in Queensland, a new report has found.
The Midwood Queensland Investment Report showed house prices in the sunshine state’s capital city had fallen 10.3 per cent since its peaks in December 2007.
“This is the only time that Brisbane average house prices have fallen in any six month period since 1978 when our records from the Queensland Department of Natural Resources and Waters commenced,” author of the report Bill Morris said.
“Prices showed no sign of recovery at last count in June 2009. To increase interest rates at such a time would be foolish.”
Mr Morris also said suggestions of a housing bubble by the Reserve Bank are ill-founded.
“With first home buyer incentives being cut back at the end of the year, housing demand will be even further reduced,” he said.
“Dwelling commencements in Queensland for the financial year 2008-09 were only 28,229, or approximately 60 per cent of underlying demand. This reflects a tight credit regime, which will translate into lower demand for both new and used houses over the next two to three years.
“Interest rates should remain as they are until there is evidence that housing demand will increase through more accessible credit.”