Luxury home prices to drop further

High-end home prices in Australia declined by 7.5 percent in the six months to September says real estate researcher RP Data.

In comparison, the average increases for other types of houses rose by 1.1 percent increase in the rest of the market. Moreover, luxury homes in Melbourne dropped by 10.8 percent during the same period as opposed to an average 2.5 percent price climb for other houses.

“There’s about a 5 per ent gap in what sellers expect and what buyers are willing to pay,” David Airey, president of the Real Estate Institute of Australia told The Sydney Morning Herald. “In the first and second quarters of 2011, there will be a rise in activity as sellers adjust prices down.”

Luxury properties in the country “were once considered to be safe havens during a downturn,” RP Data economist Tim Lawless added. “More recently, however, the premium housing sector has displayed a higher level of volatility.”

“The luxury market is certainly softer than what it was,” Dan White, a director at Brisbane-based Ray White, said in an interview. “There’s a lot of speculation about house prices, comments that they’re overvalued. And that happened at the same time that rates started to increase. Buyers are now feeling that they can search for value.” Luxury home prices are expected to decrease even more in 2011 as the typical buyers of such houses delay making any purchasing decision because of economic jitters surrounding the American and European markets.