Turnover in Australia's housing market is continuing to fall -- and that's a problem

Mandatory Credit: Craig Prentis /Allsport

Turnover in Australia’s capital city housing markets fell to the lowest level on record in the year to September, coinciding with another year of strong price growth in Sydney and Melbourne, the nation’s largest and most expensive housing markets.

According to data from CoreLogic, just 4.7% of dwellings changed hands over this period, the lowest percentage on record since the group began collating this data back in 2008.

As seen in the chart below from CoreLogic, it’s been nothing but one-way traffic for turnover as a percentage of total stock in Australia’s capitals over the past two years.

Source: CoreLogic

Helping to drive the slowdown, turnover in Sydney and Melbourne both hit historic lows, falling to 4.7% and 4.4% respectively.

In the other capitals, turnover levels fell in Brisbane and Hobart but increased in Adelaide. Canberra, Perth and Darwin were relatively flat from one year earlier.

Source: CoreLogic

Cameron Kusher, research analyst at CoreLogic, said the national decline was driven by both supply and demand factors.

“A big driver of the low level of turnover over the past year has been relatively low levels of stock for sale, particularly in our largest capital cities, and the high costs associated with stamp duty when buying a property,” he says.

“The impost of stamp duty discourages turnover as we have recently seen with the removal of stamp duty for first time buyers under certain price thresholds in New South Wales and Victoria.

“Once removed there has been a surge in housing finance commitments by first home buyers.”

Few will disagree that stamp duty charges, particularly after years of strong house price growth, have contributed to lower turnover levels in recent years, not only exacerbating housing affordability constraints but also discouraging homeowners from selling, especially among those who need to buy back into the market.

“High transactional costs, which are based on a percentage of the purchasing price, have become a larger disincentive across those markets where values have shown a material rise,” Kusher said in a note earlier this year.

That partially explains why turnover in Sydney and Melbourne has fallen noticeably in percentage terms over recent years. And with housing demand strong thanks to record-low interest rates and strong population growth, it has undoubtedly contributed to enormous price gains in these cities over the past decade.

While affordability constraints and higher transactional charges have been a factor behind lower turnover levels, some homeowners may have also put off selling given strong price growth in these markets over the past year.

However, coinciding with a sharp deceleration in price growth in Sydney in recent months, the number of listings in Australia’s largest city has risen to the highest level since late 2015, according to CoreLogic.

Melbourne, where prices are still rising at a decent clip, total listings remain around the same levels as a year earlier.

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