The price of houses in Sydney has been high for the longest time now. According to Fairfax Media, the house prices on the eastern and inner suburbs of Sydney have fallen. The fall is put at around 6% for the quarter ending September 2017.
However, according to Robert Gottliebsen, an Australian columnist, the price fall is around 25%. According to the way things are going, he sees the prices falling by up to 50%. This could lead to serious downward economic effect on Sydney city. In fact, he says that the drop in value of property in the posh Sydney suburbs is more than what most experts had predicted.
Economists agree that the USA’s tax cuts will lead to the rise of global interest rates. Already, Sydney banks have started to report problem loans. The real effects of the USA tax cuts are yet to be experienced.
Melbourne will likely not be affected in a big way as Sydney because the house prices there are moderately low. In Brisbane, which is already in trouble, the expected price falls might not be as severe.
According to domain.com.au, the house prices in Melbourne rose by 1.3% in the quarter ending September 2017. On average, the property price across Australia fell by just 0.3% in the same period. This goes on to show that even if the global interest rates rise, the net effect in Melbourne and other low priced cities and suburbs will be minimal. However, no one should be cracking champagne as the true repercussions are yet to be seen.
If the house price falls for another quarter in the said Sydney suburbs, it will mean that a house will have lost $200,000 in a period of just six months. On average, the City of Sydney house prices have dropped by 2%. This is not good because Sydney’s borrowing rate is at record low.
Things have not been made any better by the government. In the last budget, the Treasurer Minister, Scott Morison, very quietly stopped the deduction of depreciation on used property. This means that when you are filing your taxes, you will not be allowed to deduct depreciation as an expense. This in effect makes the price of a used house dip even further than that of a new one.
The Minister tried to calm the nerves of property owners by saying that the 20-25% price fall will not be experienced across Sydney. He also assured property owners that the other expenses relating to the selling or buying of property will remain low.
However, according to Gottliebsen, it is the government making such decisions without knowing the real after effects which will make the situation worse. He further says that the real estate agents who sweet talk people into believing that nothing is wrong will make the already bad situation severe.