Rents will rise as house prices fall: Westpac
And while residential property sales may pick up a little in coming months as some property investors reorganise or quit the market, Westpac expects several years of subdued sales volumes and prices.
"Based on today's fundamentals, we'd say houses are only slightly overvalued," said the bank's chief economist, Brendan O'Donovan, after a fall of 12% in inflation-adjusted terms since 2007 when the housing market was "grossly overvalued".
"We are forecasting modest house price declines, in the order of 2% per annum, for 2010 and 2011."
However, different parts of the market would react differently, especially to the October tax changes, with the likelihood that rented, typically lower-value properties would fall in price while high income earners would have more disposable income after the tax cuts, underpinning high-end property.
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