The Real Estate Institute of Australia (REIA) has shot down suggestions that property prices could fall by 30 per cent, calling such a prediction “highly questionable” and unable to be relied upon “with any degree of confidence”.
A statement from the institute’s president, Adrian Kelly, said: “We are in unprecedented times and anyone that suggests they can forecast with any acceptable degree of probability is being highly fanciful.
“We can only look at what is happening in the marketplace at the moment as well as in previous times of high unemployment to provide pointers to likely outcomes.”
The president flagged that the current situation shows listings are decreasing while enquiry levels from prospective buyers increase.
He said: “It is simple economics that when supply decreases and demand remains that prices edge upwards.
“They certainly don’t drop.”
He also pointed to recent forecasts from the Housing Industry Association that indicated the supply of new housing will be “severely constrained” over the next 12 months — by almost 50 per cent.
“This does not suggest a scenario of supply exceeding demand — a prerequisite for falling prices,” he added.
Acknowledging that higher levels of unemployment will constrain house prices by an anticipated 10 per cent, Mr Kelly said such falls have been experienced before and we should look at what happened to housing prices then.
“History shows us that in the early 1990s, we had a sustained period of unemployment above 10 per cent yet median house prices remained stable,” he said.
“It needs also to be remembered that in ‘the recession we had to have’, interest rates for housing loans were around double what they currently are.
“I do not believe that this points to a catastrophic outlook for house prices.”