Interest rates to keep house prices down

15/06/2010

House price growth will slow in 2011 because of rising interest rates says the latest BIS Shrapnel Residential Property Prospects, 2010 to 2013 report. ''With interest rates quickly lifting from these emergency levels, and the current variable rate of 7.4 per cent now being close to long-term trends, the recent levels of price growth cannot be maintained,'' BIS senior project manager Angie Zigomanis said Nonetheless, house prices will continue to grow, BIS claims.

The exit of first home buyers has also added to a weakening of demand. More moderate interest rate movements than recent months will aid purchaser confidence, it says. BIS forecasts the cash rate to rise by 50 basis points in the 2010-11 financial year and by another 50 basis points in 2011-12. ''The more stable interest rate environment is expected to underpin purchaser confidence as economic conditions continue to strengthen, and should continue to push through moderate house prices rises,'' Mr Zigomanis said.

Source: The Age