Turnover in Australia's housing market hits another multi-decade low

Mark Wilson/Getty Images
  • There’s a growing glut of Australian homes currently up for sale.
  • That largely reflects reduced buyer demand despite steep declines in new listings.
  • Westpac calculates that national housing turnover fell to the lowest level since 1987 in the final three months of 2018.
  • With new housing finance weakening and pessimism towards the outlook for prices heightened, listing levels look set to remain elevated for some time.

With prices falling in many parts of the country, Australian homeowners are unsurprisingly reluctant to list their property for sale given current market conditions.

According to CoreLogic, new property listings — defined as those properties that have not been put up for sale in the past six months — slumped to 24,930 over the past four weeks, down a hefty 18.8% from the levels seen just 12 months ago.

The declines in Sydney and Melbourne — those capitals where home prices fell the fastest in 2018 — were particularly acute, falling 25.3% and 24.2% from a year earlier.

However, despite the steep reduction in new listings in Australia’s largest and most expensive cities, total properties on the market continues to swell, lifting to 118,969 across the capitals over the past four weeks, up 9.1% from the same period a year ago.

That indicates that while the supply of listings is now starting to fall, properties are still hitting the market faster than what they are selling.

This chart from Westpac Bank shows that in visual form.

Westpac Bank

The left-hand pane shows the ratio of new listings to property sales. A reading of less than one indicates that new supply is outstripping sales.

With the ratio currently sitting at just above 0.8, the level of unsold homes sitting on the market continues to increase, lifting to around six months worth of supply at the current pace of sales as seen in the right-hand pane of the chart.

“Listings highlight difficult selling conditions,” says Westpac.

“Despite a 5.7% decline in new listings across the major capital cities over the second half of 2018, the much sharper drop off in sales means unsold inventory is rising quickly and at high levels in relation to monthly sales.”

According to calculations from the bank, national housing turnover plunged in the December quarter last year with just 3.6% of dwelling stock changing hands, the lowest proportion since 1987.

The decline largely reflects the impact of falling home prices, not only deterring owners from listing but also discouraging potential buyers given growing expectations that prices will continue to fall.

After initially being driven by tighter lending standards and reduced demand from local and offshore investors, housing credit growth has slowed noticeably in recent months, largely reflecting a drop in demand for housing finance, particularly among investors.

Given credit growth plays a key role in property price movements, ongoing weakness in demand could see home prices fall even further, a scenario that could see turnover fall even lower and listing levels remain at elevated levels.

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