03 May 2019
April’s end marked the 19th consecutive month of house price declines since they peaked in September 2017, with the 9.7 per cent fall since then representing a greater drop than that suffered during the global financial crisis, when prices fell 7.6 per cent.
Overall Australian capital city dwelling prices fell 0.5 per cent across the month, with CoreLogic finding that Sydney and Melbourne each declined 0.7 and 0.6 per cent respectively. For both cities, their declines over the last 18 – 22 months are their worst since the early 1980s recession.
While the two cities had seen the steepest falls of Australian cities since 2017, other cities were also soft, with Perth and Darwin both falling for the last five years and Brisbane and Adelaide also proving weak.
AMP Capital chief economist, Shane Oliver, predicted that national capital city property prices would bottom out in 2020, after a top to bottom fall of 15 per cent, with the previously property-booming Melbourne and Sydney suffering a total decline of around 25 per cent. He noted that with national prices already having fallen nearly 10 per cent, they were almost at this point.
Oliver was reassured that we hadn’t seen any of the panic selling that some feared would occur however, pointing to the slowing pace of house price falls, a bounce in housing finance in February, and a pick-up in auction clearance rates from their lows at 2018’s end as positive signs for the market.
Although Oliver admitted that a May interest rate cut was a close call given it would fall during the election campaign, he said that the continued house price declines would contribute to a cash rate cut to one per cent by the year’s end.
“Ongoing home price falls will depress consumer spending as the wealth effect has now become negative and homeowners are less inclined to allow their savings rate to decline further to compensate for weak wages growth,” the economist said.
“With growth slowing and inflation coming in weaker than expected, rate cuts are likely to come earlier than our previous expectation for cuts in August and November, with the first cut probably coming next week.”
The below chart tracks the residential property markets in Australia’s capital cities since the market began to fall nineteen months ago, as well as the Australian Bureau of Statistics (ABS) Residential Property Eight Cities Index, according to FE Analytics.