House price crash: winners, losers and those who shouldn’t worry

Property price falls are tipped to accelerate as interest rates and inflation bite, but a big downturn is less painful than many think.

After the boom comes the bust, but for the vast majority of real estate owners and investors the bust won’t cause a fuss.

Property prices are falling in all capital cities and there has been a sharp rise in distressed sales and forced transactions leading to prices being slashed.

Seven interest rate rises in seven months from the Reserve Bank are denting demand and confidence, and are yet to fully impact household income and spending.

Prices nationally are so far down less than 4 per cent on average and several forecasters predict 15-20 per cent house price falls, but even if that eventuates only a handful of people will be hurt badly.

These poor property souls include:

• People trying to refinance their debt as interest rates soar, only to find their equity is negative and banks won’t budge.

• Those who bought a home just before the bust but did not sell their existing home, resulting in double the pain as both properties plunge in value.

• Anyone selling without plans to buy again so they’re receiving less for their property than they would have a year ago.

However, heavy falls in property prices have little impact on most long-term owners and can potentially benefit others.

House prices have been dropping across Australia, and the falls could accelerate soon.

It makes housing cheaper for first home buyers, but remember that a 10 or 20 per cent fall in property prices is more than offset by mortgage repayments rising 40 per cent after the recent string of Reserve Bank rate rises.

Investors, who usually have much more financial firepower than first home buyers, will be ready to snap up bargain deals.

People who are buying and selling in the same market at the same time do not suffer in the long run. For example, if they get 10-20 per cent less for selling their property, they should pick up the new property at roughly the same discount.

The biggest reason why a bust should not worry people is because they are completely normal – especially after a boom – and historical numbers show that property prices have always gone up over the long term.

In 20 years, Sydney’s median house value has jumped from $472,000 to $1.19 million, Melbourne from $331,000 to $908,000, Brisbane from $195,000 to $832,000, Adelaide from $180,000 to $695,000, Perth from $189,000 to $591,000, Hobart from $135,000 to $788,000, Darwin from $206,000 to $561,000 and the ACT from $238,000 to $1.01 million, according to PropTrack and Real Estate Institute data.

Different markets behave differently. The big capitals of Sydney, Melbourne and Brisbane are not the same as Adelaide where price movements are less volatile, and Perth or Darwin, which fell heavily in recent years and are still recovering.

Hobart has done its own thing for years, with median prices leapfrogging several other capitals, while Canberra reflects the government of the day and public service levels more than other cities.

If you’re a typical property owner or investor, what happens with prices in the next six, 12 or 18 months really doesn’t matter. As long as you keep paying the mortgage, you’ll be fine in the years and decades to come.

Originally published as House price crash: winners, losers and those who shouldn’t worry