Economist says property prices to remain stable

RACHNA LAL
SUVA

A local economist and an academic believes property prices in Fiji will not change dramatically over the next several years, as long as interest rates stay low.
Keshmeer Makun, who is a lecturer at the Fiji National University, said if there is any slide in the housing market, it will be slow.
“This is as prices are sticky on the downside because there is no major economic setback such as a huge spike in unemployment to force people to sell,” he said.
However, he cautioned inflation could be a problem in the long run.
“Therefore, one has to closely monitor this trend and if need be, intervene with appropriate policy measures,” Mr Makun said.
“This is because by the time our domestic first home buyers will be ready to buy houses, prices might be soaring.”
Mr Makun said one of the policy options could be to attract foreign/Asian investors to purchase unfinished properties or to do completely new construction.
“This will not only keep the prices steady but also create employment in the economy,” he said.
“On the other hand a decline in real estate sales eventually leads to a decline in real estate prices.
“This then reduces the value of everyone’s homes, whether they are actively selling it or not.
“This then reduces the amount of home equity loans the homeowner can get. This, then, reduces consumer spending.”
Mr Makun said a reduction in consumer spending will contribute to a downward spiral in the economy.
“This results in further unemployment, further reduction in income and further reduction in consumer spending,” he said.
“The only good news about lower home prices is that it lessens the chances of inflation.”
Feedback: rachnal@fijisun.com.fj