Brakes on housing downturn
May 1, 2019
By Liz Jordan
4 min read
THE house price slump across Australia continued to ease in April, but the annual fall is the largest since the global financial crisis, and the major markets of Sydney and Melbourne may only be around the halfway mark in their peak-to-trough falls.
CoreLogic data for showed dwelling values slipped by 0.5% over the month, and are now down by 7.2% over 12 months, and 7.9% below the September 2017 peak.
The rate of decline has been easing since hitting a 1.1% drop in December. Sydney dwelling values were down 1.8% during that month, with the pace falling gradually 0.7% in April.
Similarly, Melbourne values were down -1.5% in December, and that rate of decline has improved to 0.6% in April.
CoreLogic head of research, Tim Lawless, said other property market insights supporting a subtle improvement in housing market conditions include a rise in mortgage related valuations activity, an improvement in ABS household finance data for February, and auction clearance rates holding around the mid-50% range across the major markets.
“While none of these indicators could be described as strong, the current trend in the data implies that housing market conditions may have moved through the worst of the downturn,” he said.
Dwelling values fell across every capital city apart from Canberra, while regional areas of Tasmania, Victoria and South Australia also avoided a fall. The broad-based nature of lower housing values highlights that while the rate of decline has eased, the geographic scope of lower dwelling values remains broad, Lawless said.
Values slipped by 0.9% in Hobart, which marked a weakening of what has been one of the strongest capital city markets for value gains.
The 7.2% annual fall national dwelling values was the largest since February 2009, which was associated with the GFC. Sydney and Melbourne are now both recording double-digit annual declines year-on-year, at 10.9% and 10.1% respectively.
AMP Capital chief economist, Shane Oliver said the investment manager’s base case remains that national capital city property prices will have a top to bottom fall of 15%, out to a bottom in 2020 of which they have so far done nearly 10%.
Previous boom-time cities of Sydney and Melbourne will see a top to bottom decline will be around 25%, of which they have so far done nearly 15% and 11% respectively.
NAB recently downgraded its house price forecast for 2019 after weak conditions early this year were worse than expected, and is now anticipating peak-to-trough falls in Sydney and Melbourne of 20% and 15% respectively. The revision followed Moody’s Analytics announcing its own downgraded forecast.
Oliver said the negatives weighing on the property market remain significant and include tight credit (which will get another boost from mid-year with the start-up of comprehensive credit reporting which will see banks crack down on borrowers with multiple undeclared loans), the ongoing switch from interest only to principle and interest loans, record unit supply still to hit particularly in Sydney and Melbourne, an 80% collapse in foreign demand, fears that negative gearing and capital gains tax arrangements will be made less favourable if there is a change of government and falling prices feeding on themselves with FOMO (the fear of missing out) becoming FONGO (the fear of not getting out).
“Taken together these are continuing to drive a perfect storm for the Sydney and Melbourne property markets because they saw the strongest gains into 2017 and had become more speculative with a greater involvement by investors,” he said.
CoreLogic data showed annual price falls in Perth (8.3%), Darwin (7.1%) and Brisbane (1.9%). Hobart posted the biggest gains (3.8%), and then Canberra (2.5%), while Adelaide is the only other capital city to show growth (0.3%).
Source: Australian Property Journal