House price dip a 'correction'
PRIME Minister John Howard says a fall in house prices in some cities was a natural correction to an overheating market but was silent today on higher interest rates.
House prices have fallen in Sydney with higher interest rates but risen dramatically in Perth as the West Australian economy powers along on a resources boom.
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"The housing market in sections of the country did get overheated and there did need to be some correction," Mr Howard told CNBC television.
"I think that's occurred without big damage being done to borrowers and big damage being done to the industry and that's beginning to come back."
Mr Howard refused to comment on speculation the Reserve Bank will lift interest rates next month.
"As for speculation about interest rates, I won't engage in that. That's a matter for the central bank to determine," he said.
The central bank raised interest rates three times last year, with November's rate rise of 25 basis points taking official interest rates to a 6-year high.
People on lower incomes and Australians over their heads in debt would be hit hard by another rate rise.
Bank repossessions of properties are rising around Australia, particularly in the outer suburban areas of Sydney and Melbourne, as some people fall behind on debt repayments.
Property investors who also bought at the peak of the boom of 2003 have also been stung by higher interest rates and some home owners are now in a position where their mortgage is worth more than their home, or in a position where they hold "negative equity".