- There’s now little doubt that home prices in Sydney and Melbourne are falling faster.
- With property listings in both cities at elevated levels when demand is weak, it suggests vendors are having to accept lower offers in order to secure a sale.
- Property listings — whether new or existing — are also increasing in most smaller capital city markets, suggesting the recent trends seen in Sydney and Melbourne could soon be replicated across the country should demand not begin to improve.
The price downturn in Sydney and Melbourne’s housing markets is speeding up, hinting that vendors are now adjusting their price expectations in order to secure a sale.
According to CoreLogic, Melbourne’s median home value tumbled 0.4% last week, extending the decline over the past month to 0.8%.
After tumbling 0.5% a week earlier, Sydney prices continued to slide, falling by a further 0.3%, leaving the drop from a month earlier at 1.2%.
Adelaide’s median price, despite being the top-performing capital city auction market in recent months, also fell, losing 0.1% last week, the same decline reported over the past month.
Elsewhere, median prices were unchanged in Brisbane and Perth over the week.
Economists and policymakers are starting to pay increased attention to the property market downturn and its potential associated impacts. In a speech delivered last week, RBA Governor Philip Lowe said he was becoming “a bit concerned” that lending standards are becoming too restrictive, warning that the “economy will suffer” should current caution from lenders persist.
Given today’s data it’s unlikely Lowe’s concerns have dissipated, fueling unease that weakness in the housing market could soon start to weigh on employment growth and household spending, and with it broader economic growth.
Given around 40% of all Australian homes, and 60% of Australia’s total housing wealth, is located in Sydney and Melbourne, the steep declines in those capitals, along with flat to lower outcomes in other markets, helps explain why prices across Australia’s five mainland state capitals slid 0.2% last week in average weighted terms.
Coast to coast
From a month earlier, the average price in these cities has now fallen 0.8%, suggesting CoreLogic’s more comprehensive Home Value Index will show a similar nationwide decline when released in early December.
The group said in October, Australia’s median home price fell by 0.5%, including by 0.6% in the capitals.
Given recent trends in the mainland state capitals, it looks like the decline in November could well be larger.
Since the start of the year, prices in Sydney and Melbourne have now fallen by 6.9% and 5.4% respectively.
Along with a 3.6% fall in Perth’s median value, and modest gains of 0.4% and 0.9% in Brisbane and Adelaide respectively over the same period, the average weighted price in the mainland state capitals has now fallen 4.9% year-to-date.
Similar trends were also seen in movements over the past 12 months with prices in Sydney, Melbourne and Perth down 7.9%, 5.6% and 4% respectively, leaving the average weighted decline across the mainland state capitals at 5.5% despite gains of 0.3% and 1.5% in Brisbane and Adelaide.
Hinting that the recent acceleration in price declines in Sydney and Melbourne are being fueled by vendors adjusting their sales price expectations, total property listings in these cities surged by 19.2% and 20.2% last week compared to the same corresponding week a year ago.
At a time when demand is weak due to the impact of tighter lending standards, reduced activity from local and foreign investors and weak sentiment towards the outlook for valuations, the recent acceleration in the pace of price declines in these cities suggests an increasing number of vendors are lowering their expectations in order to secure a sale.
Even with fewer new listings in Sydney and Melbourne, reflecting that weak market conditions are discouraging some from putting their property up for sales, there’s still an abundance of homes for buyers to chose from, leaving many with their homes already on the market little choice but to accept lower offers.
Hinting that similar trends could also be seen in smaller, more affordable markets, in the months ahead, CoreLogic said total listings rose in all capital cities except for Darwin over the past year, ranging from 0.9% in Adelaide to as much as 12.2% in Canberra.
With more stock available for sale in these locations, the downturn in the Sydney and Melbourne markets may soon become a national story should demand not increase by a similar margin in the period ahead, especially with new listings in most capitals also lifting from the levels of a year earlier.
Although that’s a clear risk, given affordability in these markets is far less stretched than in Sydney and Melbourne, any price falls, should they occur, are likely to be far more modest in nature.