Housing prices are falling fast

National house prices fell for the 10th consecutive month in July, CoreLogic figures released on Wednesday show, with the 0.6 per cent month-on-month fall bringing the annual decline to 1.6 per cent — the fastest rate since August 2012.

House prices are now 1.9 per cent below their September 2017 peak, but are still 31 per cent higher than five years ago. CoreLogic said the weakness was driven by long-running declines in Perth and Darwin and an acceleration of the rate of decline in Sydney and Melbourne.

“We can’t see any factors that may halt or reverse the housing market’s trajectory of subtle declines over the second half of 2018,” CoreLogic head of research Tim Lawless said. “The availability of housing credit has been a significant factor contributing to this slowdown, however there are a variety of hurdles contributing to slower conditions.”

Five of the eight capital cities have posted median house price declines over the past three months, with Melbourne and Perth seeing the steepest falls.

Sydney fell 1.1 per cent to $863,769, Melbourne fell 1.8 per cent to $709,568, Perth fell 1.5 per cent to $457,274, Darwin fell 1 per cent to $439,596 and Canberra fell 0.2 per cent to $590,229. Hobart was the best performing city with a 1.1 per cent increase to $435,833. Brisbane was up 0.5 per cent to $494,634 and Adelaide was up 0.7 per cent to $438,163.

Mr Lawless said the biggest declines were occurring in the premium end of the market.

“The starkest annual performance differential is in Melbourne, where the top quartile has seen values fall 4.1 per cent over the past 12 months while property values in the lower quartile are 7.5 per cent higher,” he said.

“Similarly, in Sydney, dwelling values are down 8 per cent across the most expensive quarter of the market, while the most affordable quarter of the market has seen values fall by a much lower 1.8 per cent over the past 12 months.”

The other capital cities recorded substantially less variation between the valuation segments, which CoreLogic attributed to a surge in first homebuyers supporting demand at the lower end of the market following stamp duty concessions in NSW and Victoria in July last year.

At the same time, a new focus on borrowers with a high debt-to-income ratio was likely to be dampening the amount of funds available for purchasing expensive dwellings. The house price to income ratio was tracking at 9.1 in Sydney and 8.1 in Melbourne at the end of June.

“While dampening factors are at play, consistently low mortgage rates will continue to provide a support buffer which should help to keep a floor under housing demand,” Mr Lawless said.

“Owner-occupiers continue to enjoy mortgage rates at the lowest level since the 1960s, and although investors are paying around a 60 basis point premium on their home loans, interest rates remain low for this segment of the market as well.”

While higher funding costs could see mortgage rates edge higher, they would need to rise by more than 150 basis points to return to the 20-year average of 6.8 per cent, Mr Lawless added.

It comes after a number of major banks downgraded their forecasts for the Australian housing market. NAB predicts house prices will flatten in 2020, with a peak-to-trough fall of 6.5 per cent in Sydney and 2.5 per cent in Melbourne.

ANZ said it expects to see peak-to-trough declines of around 10 per cent in both Sydney and Melbourne in the same period. AMP Capital chief economist Shane Oliver believes Sydney and Melbourne will see declines of 15 per cent while the national average will fall by 5 per cent.

frank.chung@news.com.au

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