Fears of a sharp increase in Australian property prices creating a housing bubble have been dismissed by Citi Research.
Under its newest model, the research firm predicted that house prices would rise by three per cent by March 2014 but would fall slightly after that.
Its baseline scenario was conducted under the assumption that the Reserve Bank of Australia's (RBA) benchmark rate would not be cut until Q2 of 2014. Rate cuts have been one of the main driving factors of increasing house prices as consumers seek to take advantage of the cheaper mortgages available. However, they have slowed in recent months.
The areas that seems to be pulling back the chances of a housing bubble include the decrease in Chinese immigration and falling value of the Australian dollar. However, a lower valued dollar could encourage property investors abroad to come to the country which is widely regarded as an expensive location to move to.Posted by Craig Francis
