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Australia house price collapse 'fastest ever'

Author
news.com.au,
Section
Business,
Publish Date
Friday, 1 February 2019, 3:47p.m.
Melbourne house prices have had record declines. Photo / File
Melbourne house prices have had record declines. Photo / File

Melbourne house prices have fallen at their fastest quarterly pace on record amid tightening credit conditions and souring sentiment ahead of the release of the banking royal commission's final report next week.

Australia's CoreLogic figures released on Friday show national dwelling values declined another 1 per cent in January, bringing the cumulative decline to 6.1 per cent since the overall market peaked in October 2017.

The declines in January — although traditionally a tricky month due to low levels of activity — continue the housing market's trajectory from 2018, which saw the weakest conditions since the GFC.

Sydney and Melbourne were down 1.3 per cent and 1.6 per cent respectively over the month, bringing their rolling quarterly falls to 4.5 per cent and 4 per cent and annual falls to 9.7 per cent and 8.3 per cent.

The NSW and Victorian capitals are now 12.3 per cent and 8.7 per cent down from their respective peaks in July and November 2017, with values in those cities now back to levels last seen in July 2016 and January 2017.

"If you had asked me in September last year I probably would have been surprised to see Sydney and Melbourne values down more than 4 per cent over the rolling quarter," said CoreLogic head of research Tim Lawless.

"We have seen the downturn accelerate over the last three months. At 4 per cent down in Melbourne that's the fastest rate of decline we've ever seen of any rolling three-month period, and Sydney is virtually (the fastest outside) a really brief period in the '80s."

Sydney's total decline is now the worst since the research firm began collecting records in 1980, having eclipsed the previous record of 9.6 per cent set between 1989 and 1991. Melbourne's worst fall around the same period was 10 per cent.

"The market's down 8.7 per cent, it doesn't have far to go and my assumption is we will see Melbourne setting a new benchmark for the magnitude of the decline," he said. "Sydney clearly is in new territory."

Lawless said the weakness in Sydney and Melbourne, which combined make up roughly half the value of Australia's housing market, was being compounded by other cities which were now beginning to feel the pinch as well.

Values (in those areas) are still rising but are clearly slowing as well," he said. "I think we can firmly point towards tighter credit and lending conditions throwing a dampener over the market."

Unlike previous downturns, which typically coincide with a sharp rise in mortgage rates, this downturn is occurring against a backdrop of reasonably robust economic conditions, decent jobs growth and low rates.

"If anything it's a consolation," Mr Lawless said. "The RBA can bring rates down, there's a potential that might happen, people have jobs and are able to pay down their mortgages. In that sense the downturn is manageable."

He conceded that "we are seeing some wealth destruction". CoreLogic now forecasts total declines in Sydney and Melbourne of 18-20 per cent, but notes that comes after prices rose nearly 80 per cent and 60 per cent respectively.

"Most homeowners would still have a great deal of equity in their properties," he said. "It's really just those owners that have bought in the last couple of years that are facing the prospect of negative equity."

The median value at the end of January in Sydney was $795,509, Melbourne $636,048, Brisbane $494,345, Adelaide $430,711, Perth $441,920, Hobart $457,785, Darwin $412,940 and Canberra $596,933. The national median was $528,553.

Every capital city notched declines except Canberra, which saw values rise 0.2 per cent. Brisbane and Adelaide were down 0.3 per cent, Perth 1.1 per cent, Hobart 0.2 per cent and Darwin 1.7 per cent.

The most expensive end of the market is suffering the biggest falls. In Melbourne, the top quarter has fallen by 12.4 per cent over the past 12 months and 13.8 per cent since peaking. In Sydney those numbers are 10.8 per cent and 14.6 per cent.

CoreLogic said the year had started off with fewer fresh listings and relisted properties continuing to mount up. Compared with last year, new listings in January were tracking 13 per cent lower and total advertised stock levels nearly 16 per cent higher.

It's a buyer's market as challenging selling conditions are forcing more vendors to offer discounts. CoreLogic said vendor discounting across the combined capitals had increased to a median level of 6.1 per cent over the quarter, up from 4.7 per cent the same time last year.

Meanwhile, the median selling time has risen to 44 days, up from 37 days a year ago. Settled sales in the 12 months to January 2019 were 12.3 per cent down compared with the prior year.

CoreLogic will resume reporting auction results next week but said it was not expecting a turnaround from the downward trend which saw clearance rates plunge as low as 40 per cent by December.

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