- Australian home prices have fallen for nine consecutive months leaving the decline over the past year at 0.8% in average weighted terms.
- Price changes ranged widely across the country in 2017/18, from growth of 12.7% in Hobart to a drop of 7.7% in Darwin.
- Many suspect the list of bottom performers over the next 12 months is likely to be dominated by Sydney and Melbourne.
Australian home prices fell for a ninth consecutive month in June, according to CoreLogic, leaving the decline over the past year at 0.8% in average weighted terms.
However, that only tells part of the story.
As seen in the chart below from CoreLogic, there was a wide divergence in price movements across the country during the past year, ranging from 12.7% growth in Hobart, Tasmania’s capital, to a decline of 7.7% in Darwin, still grappling with the winding up of Australia’s mining capital expenditure boom.
SA4 regions, shown in the chart above, are the largest sub-state regions in Australia. There are 106 scattered around Australia.
Looking at the SA4 regions with the largest price declines over the year, many are located in area where population growth is strong and affordability is comparably better than closer to city centres.
In contrast, Sydney dominates the list of the largest price declines over the past year, reflecting poor affordability and the introduction of tighter lending standards from Australia’s banking regulator, APRA, in March last year.
Sydney’s median home price has fallen 4.5% over the past year, a trend that is likely to continue according to CoreLogic.
“With lenders now focusing more on overall debt-to-income rations and household living expenses, housing markets where price are high relative to incomes could see less activity as prospective buyers find their borrowing capacity reduced,” said Tim Lawless, Research Director at CoreLogic.
Shane Oliver, Head of Investment Strategy and Chief Economist at AMP Capital, agrees that price weakness in the period ahead is likely to be concentrated in the top end of Australia’s housing market.
“The combination of tighter bank lending standards — particularly with the focus now around borrowers’ income and expenses and restricting loans to households with high debt to income ratios — along with poor affordability, rising supply, falling price growth expectations and the end of FOMO (fear of missing out) are pushing prices down in cities which have seen strong gains since 2012 such as Sydney and Melbourne,” he says.
“The decline in Sydney and Melbourne property prices likely has further to go as these considerations continue to impact.
“We expect these cities to see a top to bottom fall in prices of around 15% spread out to 2020 which, given falls already recorded since last year, implies another 10 to 13% downside.”
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