House prices fall faster than during global financial crisis

ABS figures show the property market’s fall is worsening with the market losing $133 billion of value in just three months.

Australian property prices are falling at a faster rate than during the global financial crisis (GFC) with new figures showing the decline is widening outside the Sydney and Melbourne markets.

The Australia Bureau of Statistics released figures today showing house prices in capital cities fell 2.4 per cent in the December quarter to record a total drop of 5.1 per cent in 2018.

This compares with the annual fall of 4.6 per cent in 2009 during the GFC.

Sydney prices lost 3.7 per cent to the three months to December for the sixth consecutive quarter loss and were down 7.8 per cent for the year.

Melbourne prices were down 2.4 per cent for the quarter and 6.4 per cent for the year.

The bureau’s chief economist Bruce Hockman said the falls in the nation’s two major property markets were based on a number of factors.

“While property prices are falling in most capital cities, a tightening in credit supply and reduced demand from investors and owner-occupiers have had a more pronounced effect on the larger property markets of Sydney and Melbourne,” he said.

The drop was experienced outside the two major capitals with prices in Brisbane losing 1.1 per cent, Perth down 1 per cent, Darwin 0.6 per cent and Canberra edging 0.2 per cent lower.

Adelaide rose slightly by 0.1 per cent for the quarter and 1.5 per cent for the year, while Hobart was up 0.7 per cent for the three months and 9.6 per cent for the year.

The bureau said the total value of residential dwellings across the country dropped by $133 billion in the quarter to reach $6.7 trillion.

The average price of residential dwellings dropped by $15,700 to $651,100, with the total number of dwellings rising by 42,600 to nearly 10.3 million.

RATE CUT WON’T SAVE PROPERTY MARKET

Property experts have reservations the widely predicted slashing of the official cash rate from the Reserve Bank of Australia will have a material impact on the declining market.

Investment bank UBS has even cited the possibility of it being cut more than twice to below 1 per cent.

CoreLogic’s head of research Tim Lawless doubts it will fall this far but is certain it will come down this year, though he said it won’t be reflected as a saving for the borrower.

“If we do see the cash rate coming down, the big question comes back to how much will get passed on to mortgage rates,” he told news.com.au.

“I don’t think we’ll see the entirety being reflected in lower mortgage rates.

“The banks will need to keep some of that cut up their sleeves to cover off on higher funding costs and lower net interest rate margins.”

Mr Lawless said it will be a positive for the strength of the property market but said RBA Governor Philip Lowe’s slashing the cash rate won’t offer the same relief it has in the past.

“It’s an overall net positive for the market, so the cost of debt will come down, which is a positive thing for the housing market but I don’t think we’ll see as much stimulus from a rate cut,” he said.

Realestate.com.au chief economist Nerida Conisbee said the recent controversies of the financial sector exposed at the royal commission meant the banks would be forced to pass on a rate cut in full.

She said there is a strong correlation between rate cuts and an uptick of people searching for property.

This will help to stabilise the struggling markets in Sydney and Melbourne, Ms Conisbee told news.com.au.

“It’s not going to lead to a 10 per cent-plus rebound but I think it will calm the market a little bit,” she said.

“It will be positive for housing, I think it will provide a bit of a boost in markets that are really challenged at the moment.”

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