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May 2011 Market Update

During the March quarter there has been a number of media articles reporting a fall in property prices in many residential market segments. The Australian Bureau of Statistics data released on May 2, indicates a weighted average fall in the established house price index for capital cities in the March quarter 2011 being recorded at 1.7%. All capital city prices which are recorded in this index fell apart from Perth & Hobart.

General  market uncertainty in relation to future price direction continues to prevail. Key factors in driving current residential property prices going forward are the prospect of interest rate rises due to higher inflaton, tighter lending policies being adopted by major lenders and general uncertainty in relation to employment.

Coupled with media reports now widely reporting these property price falls, we consider that these factors will be dominant in influencing price momentum in the near term. ie should higher interest rates combine with continued job uncertainty and tougher lending conditions downward momentum in prices could become a reality during 2011.

The extent to which these factors vary in the coming months will determine the decisions of purchasers in a “buyers market” and how quickly this price momentum continues south!