Industry commentators warn of property price drop ahead

Australia is likely to be spared the hammering experienced by the US and UK property markets, but the domestic industry should brace for a fall in home values in 2009.

The median Australian house price managed to remain in positive territory in 2008, but Australian households have become decidedly pessimistic about the health of the market for the year ahead.

According to the MFAA/Bankwest Home Finance Index, released last week, almost 60 per cent of households believed there will be a decline in property values in the next quarter.

And it is hardly surprising that Australian borrowers are nervous about the local market considering the battering global property prices have taken. Values have tumbled over the past 12 months by around 18% and 10% in the US and UK respectively, with further declines looking certain.

While the RBA has stressed that Australia does not face a housing crash resembling those in the UK or the United States, many economists have forecast price declines.