Housing market stays on skids after falling for 12 month in a row

Australian house prices have fallen for the 12th month in a row weighed down by a barrage of issues.

Karen Marsh in front of the home where she grew up, which has just sold in Perth’s exclusive Peppermint Grove. Picture: Colin Murty

Australian house prices have fallen for the 12th month in a row weighed down by a barrage of issues as credit continues to constrict and heavily indebted homeowners face rising repayments with the banks already increasing home loan rates.

Housing values in the major capital cities have edged down 0.5 per cent this month, taking the annual fall to nearly 4 per cent, according to researcher CoreLogic.

Sydney was the weakest capital over the past year with a 6.1 per cent fall. Melbourne fell 2.9 per cent as the eastern seaboard continued to come off the boil.

Lenders have restricted credit for investors and riskier borrowers under the direction of the regulator while the financial services royal commission — which delivered its interim report yesterday — heightened public scrutiny of poor lending practices.

Meanwhile, most major banks have lifted home loan rates, citing increased borrowing costs after the US Federal Reserve began increasing rates at the end of 2015, with its latest rise this week.

On Thursday, global ratings agency Moody’s Investor Services said housing affordability would not improve despite softening prices, noting that the falls would be offset by rising mortgage rates.

Nationally, nearly 28 per cent of household income was devoted to home loan repayments with 35 per cent of a Sydneysider’s household income going to pay the mortgage and the city again taking the mantle of the least affordable city.

The Reserve Bank has also flagged heavy household debt as a concern and commentators warn that stagnant wages growth is adding to the market risks.

The mood is a stark reversal of the five-year bull run on the east coast that saw values skyrocket until a year ago.

Although the lending clamps have been felt across the country, different cities are at varying points in the cycle, with Perth values down just 2.6 per cent over the past year despite the heaviest monthly fall of 0.7 per cent, according to a preview of the CoreLogic home value index to be released on Monday.

“Perth is a market that’s been in a downturn since the middle of 2014 — its correction is well embedded and probably getting close to being finished,” CoreLogic head of research Tim Lawless said.

“Whereas in Sydney and Melbourne, the downturn is still very fresh.

“We saw Sydney values peak out in July last year and Melbourne in November, and values haven’t fallen anywhere near as much as they have in Perth.”

Although Perth is down about 13 per cent from its peak as the mining boom ended, it could bottom out in the coming months, he said, adding that conditions were already picking up in the premium end of the market.

In the exclusive western suburbs, Ray White Cottesloe Mosman Park owner-director Jody Fewster is starting to see green shoots. “There’s a lot of pent-up demand. People cashed out and were happily renting,” she said.

“We’re now scrambling for stock, which means we’re getting multiple offers.”

But she sees a mixed market. The $1 million to $3m range is picking up, while prestige homes over $8m are taking time to sell and some of the outer suburbs are struggling.

Karen Marsh and her two sisters have just sold their childhood home in the sought-after suburb of Peppermint Grove for more than $2 million after their father moved into care. The property, which had been empty since the start of the year, drew multiple offers and sold within three weeks.

Ms Marsh is happy with the outcome, even though she was tempted to wait for the market to rise in the next few years.

Century 21 chairman Charles Tarbey said his picks for buyers are Perth, Adelaide and Brisbane because of the difference in pricing compared with other capital cities.