Australia may be one of the last, great unspoiled destinations on Earth, but like a lot of other locales, the country is having its own problems with the property market as 2009 kicks into gear. Experts are divided on the property market forecast - neither committed to success or failure - saying simply that the market is unlikely to drop more than 10-20 percent, nor increase more than five percent.

Certainly one of the driving factors affecting the 2009 Australian property market will be employment or the lack there of, given that new houses can only be afforded by those with the money to make the down payment. Having said that, the Reserve Bank of Australia has slashed interest rates a whopping three percent since September 2008 bringing the rate to 4.25 percent - setting precedence that Australia's major banks have been pressured to emulate.

If employment is the key to the success of the Australian property market, then job prospects will determine property prices. Many experts feel the current 4.5% unemployment rate is predicted to rise as high as 8% in 2009, which means if those unemployment levels are realised, house prices could start to drop.

Although still early in the New Year, economic experts feel there are four key elements that will affect the Australia property market in 2009 - and odd though it may seem - none of these elements involve supply and demand. The forces pulling Australia into the New Year are:
- Debt
- Jobs
- The world economy
- Affordability.

Regarding debt; the most problematic issue is the fact that household debt levels are at record highs. For house prices to rise people would need to be able to take on extra debt - but they can't. Official statistics already show that the majority of households are experiencing mortgage stress.

Jobs (and job security); both categories will be critical to the Australian property market in 2009. Current data shows full-time employment fell by 44,000 in December 2008, part-time employment rose 42,800 and unemployment rose by 1,200. The unemployment rate has crept up to 4.5 percent from 4.3 in just a few months. What this means is that the underlying labor shortages have been soaking up most of the unemployment pressure, with employers making roles part-time to protect themselves in uncertain times. This trend is likely to continue for the next few months but should ensure householders can continue to repay debts.

The world economy; this can be considered the key driver in regards to employment. The United States, Japan and many European countries are in recession and China is experiencing a slowdown. All of these governments have embarked on massive stimulatory programs the likes of which have not been witnessed in recent history. The future of the Australian property market will swing very much on the success of these programs, but the affects are unlikely to flow through until the second half of 2009.

Some economists are predicting across the board price falls of as much as 30% in the Australian property market, but most expect much more modest price corrections. The severe downturn in Australian housing construction and a 34% fall in residential building approvals in 2008 should ensure any falls aren't that steep.

Interest rates have made a mortgage more affordable, and the first-home buyers grant is helping, but the flipside is that unemployment has only just begun to rise and the rise will be substantial. Normally, when unemployment rises, it puts a big dampener on the housing market. For example, the period of high unemployment during the 1990s put significant downward pressure on housing prices. 2009 may bring even bigger decreases because the household debt, relative to income levels, is now four times higher than in the 1990s.

Although generally weak, the market should hold for the first half of 2009. The second half of 2009 is less clear - it may experience a minor recovery as the massive economic stimulation packages kick in, although any rally is likely to be restrained by debt levels, credit availability and affordability.

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