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Aussie property just saw its worst fall in more than 15 years

Source: Getty
Source: Getty

House prices across the country saw their steepest fall in 15 years in 2018, bringing them back to 2016 levels in what has been a housing downturn like no other.

Triggered by a combination of tightening lending standards and lower access to credit, rather than higher interest rates or seismic changes to economic conditions, this downturn has been notable for both its severity and catalysts.

The median house value fell 6.5 per cent over 2018 to $766,438, the latest Domain House Price Report revealed today.

And unit prices over the country also fell an average 2.9 per cent to $530,999.

“The current slowdown is new territory for Australia’s housing market,” Domain senior research analyst Dr Nicola Powell said today.

Source: Domain
Source: Domain

“It’s clear access to credit has been the main driver. As banks preemptively 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.”

Recent analysis by Digital Finance Analytics found around 40 per cent of loan applications for mortgages were rejected in December last year, up a staggering 32 percentage points from the 8 per cent figure a year earlier.

Source: Domain
Source: Domain

But Powell noted that buyers have adjusted to the changes, with first home buyers now having an opportunity to enter a significantly cheaper market.

“Despite the banks passing on higher funding costs and raising rates out-of-cycle, a rate cut from the Reserve Bank is becoming a greater possibility, which would help to offset higher loan costs,” she added.

Here’s what happened city by city
Source: Domain
Source: Domain

Sydney sees steepest fall in 20 years:

Owners of houses in the harbour city saw an average property value fall of 9.9 per cent, and unit owners saw falls of 5.8 per cent.

But the average house price is still an eye-watering $1,062,619.

As Powell noted, homeowners have enjoyed an “unprecedented gain” of 89 per cent over the decade from 2008, so the current slump, while incredibly steep, is unlikely to have the catastrophic impacts feared.

“The depth of Sydney’s current house price downturn is the sharpest in more than two decades, although the duration is yet to surpass the 2004-06 slump,” Powell said.

Sydney’s market has been hit by the same macroprudential policies taking the wind out of lending across the country, but savvy investors and first home buyers will find increasing opportunities.

While a major international report recently classed Sydney as “severely unaffordable”, the research analyst said affordability is improving.

“First home buyers have fewer investors to compete against, greater choice and a wider window to make their purchase. This also provides opportunity for the upsize buyer.

“It may mean selling at a lower price point compared to the boom, but if buying and selling under the same market conditions, it is likely to be offset by a more affordable upsize purchase.”

Source: Domain
Source: Domain

Melburnians saw a shorter and milder downturn than Sydney, with house prices falling 8.4 per cent over the year and unit prices fall 4.3 per cent.

The impact of the tighter lending conditions has been more muted in Melbourne thanks to the southern state’s growing employment sector, stronger population growth and generally cheaper homes.

Here, the median house price is $833,321 and the median unit price is $479,306.

Source: Domain
Source: Domain

Hobart saw house prices increase 8.8 per cent to a median $514,876, and units fell 13 per cent to $321,990. That house price increases follows 11 consecutive quarters of growth.

“Despite strong growth Hobart remains Australia’s most affordable capital city to purchase a house,” Powell said.

“However, if the level of growth continues it could lose that title and become pricier than Adelaide and Darwin.”

Source: Domain
Source: Domain

Brisbane house prices fell 0.1 per cent over the year $566,058, while unit prices fell more steeply; down 7.9 per cent to $369,058.

While Powell predicts the oversupply of units will ultimately be absorbed, the stricter lending policies are proving a barrier to recovery for now.

Source: Domain
Source: Domain

Adelaide house prices grew 1.7 per cent over the year to an average $537,971, while units grew 0.7 per cent to $321,430.

“Adelaide continues to provide buyers and sellers steady market conditions, proving to be more resilient than other capital cities under the changed lending landscape,” Powell observed.

“With the credit crunch impacting investors more than owner-occupiers, Adelaide is somewhat insulated from the restricted flow of housing finance — the southern capital has always skewed towards owner occupiers.”

It’s one of only two capitals to record annual house price growth, and the only one to record growth in units prices.

“The burgeoning food scene, established wine region, and low Australian dollar has helped to support interstate and overseas visitation to the South Australian capital. Adelaide’s sustainable growth in tourism is likely to be another investor drawcard. Confidence is rising on the back of a growing jobs market.”

Source: Domain
Source: Domain

Darwin. Here, prices fell a staggering 8.7 per cent over 2018 to $514,876. Units fell even further – 13 per cent to $321,990, with Powell arguing a recovery depends on improved population, availability of credit and jobs.

“Darwin’s housing market has been challenged in recent years. The latest figures confirm that prices have been falling for five years, and are now 24.1 per cent from the 2013 price peak.”

Source: Domain
Source: Domain

Perth houses fell 3.3 per cent in price over the year to $546,281 and unit prices fell 2.9 per cent to $351,818.

Prices are 11 per cent lower than their peak price five years ago.

“Despite the price falls, underlying demand is rising, with the number of views per listing on Domain recording the largest lift of all the Australian capital cities. It’s clear that the more restrictive flow of housing finance is hindering housing activity.”

But the foreign buyer surcharge also isn’t helping.

“A tighter rental market and improved population flows suggests the bottom of Perth’s housing market is near. However, a true recovery would be dependent on increased credit availability,” Powell added.

Source: Domain
Source: Domain

Canberra house prices were flat over the year, with prices hanging around $738,933. But units recorded a 6.1 per cent fall to $412,718.

Canberra’s two-speed market has heightened development to thank for the shock apartment price fall, but new stamp duty exemptions should entice first home buyers to the political hub.

“The prospect of an uncertain political landscape looming, and particularly if a change in government ensues, the demand for housing could be impacted in the short-term,” Powell continued.

“However, house prices are unlikely to go backwards given the ongoing controlled supply of residential land, positive economic outlook and predicted population growth.”

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