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Tuesday, July 21 2015


News Ltd columnist Alan Kohler says it will take nothing short of a recession to bring Australian house prices down.

Australian house prices were not in a bubble, but instead, in a "new normal" and are not going to come down on their own, the columnist said.

But he noted Deloitte Access Economics’ latest economic outlook where director Chris Richardson said: “The chance of a recession is higher now than it’s been for quite some time. China’s economy is the key.”

Alan Kohler referenced the RBA's recent comments:

“…there are no examples internationally of large falls in nominal housing prices that have occurred other than through significant reduction in capacity to pay (e.g. recession and high unemployment).”

And: “There is no mechanism to get a large and sustained level shift down in prices while a substantial fraction of the population can -- safely and sustainably -- service the obligations involved in paying the higher price.”

Finally: “…there is no example in Australia or internationally where supply expansion on its own generated housing price declines of a similar order of magnitude to the increases in prices seen in some Australian cities in recent years.”

Noting what’s happening in China, Alan Kohler suggested there is no chance of interest rates going up, so serviceability is only likely to improve.

"In fact, rates are more likely to come down further to try to prevent a recession here."

Kohler concluded the one bright spot was the big increase in the supply of apartments, which has resulted in smaller price rises among apartments than house, especially in Melbourne.

"Those who own a house already are winners; those who don’t will have to buy a flat."

Posted by: Greg Carroll AT 11:24 pm   |  Permalink   |  Email