The Australian property market – how will it be in 2012?

In a recent article in the Your Investment Property magazine (February 2012) Dr Shane Oliver* comments on the Australian property market.

He has analysed the situation in Europe and looked at its influence on the local economy and market.

He states that: “The fall in interest rates now underway in Australia will ultimately be good news for the Australian property market. However, as always there will be lags and how long it takes for the residential property market to turn up will partly be determined by how bad Europe gets.

“Over the next six months economic uncertainty is likely to keep buyers sidelined resulting in more weakness in property prices. However, if the recession in Europe is mild and the Australian economy is little affected then average prices will probably only fall another 5% or so and another couple of interest rate cuts (ie taking the cash rate to 4%) should help drive an upturn in property process from around mid 2102.

“However, if the recession in Europe turns out to be deep resulting in weak growth in Australia and rising unemployment then prices may not bottom until the second half of the year. Interest rates in this scenario would probably fall by another 1-1.5%, potentially taking the cash rate back to 2009 lows and this should eventually drive a recovery but probably not until early 2013.”

*Dr Oliver is the head of investment strategy and chief economist, AMP Capital Investors.

For the full details and analysis pick up a copy of Your Investment Property or got their website yourinvestmentproperty.com.au