Australia’s property downturn has entered new territory in the already volatile housing market, as housing prices fell by 6.5% in 2018 and Sydney reported its biggest declines in more than a decade.
Senior property research analyst for Domain, Nicola Powell put previous declines down to rising interest rates or economic changes, but suggests that the current fall comes from potential buyers’ restricted access to credit.
Banks have clamped down on investor and interest-only lending, while lenders are tightening standards and scaling down loan applications after being out under harsh scrutiny failings highlighted by the royal commission.
National property prices fall four quarters straight
National house prices fell 1.8% in the December quarter and 6.5% over 2018, averaging $766,438 — the steepest annual fall in 15 years.
Meanwhile, apartment values have held up slightly better in Sydney, falling 5.8% over 2018.
‘The current slowdown is new territory for Australia’s housing market,’ Dr Powell said.
‘As banks pre-emptively tighten lending standards prior to the banking royal commission’s final report next month, it is unlikely we will see any further dramatic changes to the lending landscape.’
Sydney’s current slump — with property prices 11.4% lower than their mid-2017 peak following a 9.9% drop in 2018 — is the sharpest in more than 20 years, according to Dr Powell.
The December quarter’s recent 3.2% property decline was the second time since Domain began keeping records (from 1993) that Sydney prices have fell for four consecutive quarters, as reported by AAP.
The only other time was during the global financial crisis in 2008.
‘Affordability is improving in the harbour city,’ Dr Powell said.
‘First home buyers have fewer investors to compete against, greater choice and a wider window to make their purchase.’
Australia’s national house declines
The average property price in Sydney was $1.06 million, and the average apartment price WAS $702,000, as reported by AAP.
It was the same case for Melbourne, apartment prices fell by 4.3% to $479,300 and house prices fell 8.4% to $833,300.
Darwin and Perth fell too, while Brisbane and Canberra continue to flat line.
Domain’s standout performer for 2018 was Hobart, with property prices growing 8.8%, which was followed by Adelaide’s 1.7% increase.
Low interest rates and easy credit have been driving asset prices over last couple of years. But now it’s the perfect storm, with higher interest rates and tightening credit driving assets like property and the stock market lower.
And you can bet this will have a slowing effect on the global economy.
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