The Australian property market nearly doubled between 1999 and 2003. That the housing sector has bolstered the economy is a given. But a report in May from the Reserve Bank of Australia indicates that the property boom years have peaked. Over the past few months house prices have fallen significantly, especially in the benchmark cities of Melbourne and Sydney. Recently, for example, the Economist’s Global House Price Index reported that only one-third of properties put up for auction (the most common method of sale in Australia) were sold.

Laing+Simmons identifies various factors that have impacted on the housing market, including rising interest rates and the demand for housing finance: “Based on Reserve Bank of Australia figures, acceptable housing credit growth is around the 9 per cent mark, and for this to be achieved, loan approvals will need to drop 4 per cent per month for 18 months, or a 44 per cent cumulative decline in approvals by mid-2005.”

Two new changes to property taxation in New South Wales are set to have a significant impact on some sectors of the property market. First, the treasurer for the state government in New South Wales has abolished stamp duty on homes costing up to AUS$500,000 by first-time buyers. The concession phases out for properties between AUS$500,000 and AUS$600,000. This change is expected to attract many more first-time buyers into a market from which they were previously excluded because of the high entry costs involved.

The second change is the introduction of a vendor transfer duty of 2.25 per cent on the sale of an investment property or a second home that has increased in value by more than 15 per cent. This has caused quite a lot of consternation in the market, with initial reports about a rush of vendors selling their properties prior to the deadline. Laing+Simmons predicts that this will have the effect of taking more heat out of the market, with prices levelling out in the short term.