Values fall again, but rates show early signs the downturn is slowing
The pace of Sydney’s declining property values is showing signs of slowing, a new report reveals.
Sydney’s dwelling values fell by 3.2 per cent over the March quarter, slightly less than the 4.1 per cent recorded in the February quarter, according to CoreLogic.
It’s a trend being seen around the country. The CoreLogic hedonic home value index results reveal that the pace of declining property values has eased for the first time in four months.
However CoreLogic’s head of research Tim Lawless, said the market downturn had become geographically more widespread, with housing values now lower across six of the eight capitals.
National dwelling values have been trending lower for seventeen months and have fallen by a cumulative 7.4 per cent since peaking in October, 2017.
Despite the broadbased weakness, the national index remains 15.9 per cent higher relative to
five years ago, showing that most property owners remain in a strong equity position.
Comparatively, Sydney been harder hit, with dwelling values declining by 10.9 per cent in the past 12 months, and 13.0 per cent since peaking in October, 2017.
However Sydney’s dwelling index is 23.3 per cent higher relative to five years ago.
In the house market, Melbourne has overtaken Sydney with the greatest annual decline in value. Houses in Melbourne have seen a drop of 12.4 per cent in 12 months, compared to Sydney’s decline of 11.8 per cent.
Other capital cities to see declines in house prices include Brisbane (down 1.3 per cent), Perth (down 7.6 per cent), and Darwin (down 3.2 per cent). Adelaide saw slight growth of 0.7 per cent, while Hobart house prices grew by 5.7 per cent and by 3.9 per cent in Canberra.
The weakest areas of the greater Sydney area for annual declines in dwelling values were Ryde (down 14.7 per cent), inner south west (down 14.1 per cent), Sutherland (down 12.4 per cent), southwest (down 11.6 per cent), eastern suburbs (down 11.4 per cent), Parramatta (down 11.1 per cent) and city and inner south (down 10.9 per cent).
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Mr Lawless said the housing market had recently shown some tentative signs that the downturn in dwelling values was losing some steam.
“Although this is a positive development, the outlook for the housing market will continue to be affected by uncertainty related to the federal election, lending policies and more broadly, domestic economic conditions,” he said.
“Federal elections generally cause some uncertainty, which is likely amplified more so this time around considering the potential for a change of government which will also involve
significant changes to taxation policies related to investment.”
He said there was no doubt that some prospective buyers and sellers would delay their housing decisions until after the election, however, there was no guarantee that certainty would improve post-election.
“The impact of a wind back to negative gearing and halving of the capital gains tax concession is largely unknown,” Mr Lawless said.
“It seems a reasonable assumption that removing an incentive from the market would result in some downwards pressure on activity and prices for a period of time.”
“If elected, the Opposition have flagged that changes to the capital gains tax discount and negative gearing would take effect from January 2020.”
Mr Lawless said he believed believes improving housing affordability could be the silver lining to this downturn.
“As dwelling prices trend lower or level out, household incomes are edging higher and mortgage rates remain around the lowest level since the 1960s,” he said.
“First home buyers are clearly taking advantage of the improved levels of affordability and less competition in the market.”
The view is supported by comparison site Finder, which has released results of its latest Finder RBA Cash Rate Survey, asking experts and economists how much they expect house and unit prices to rise or fall from now until the end of the year across capital cities.
The panel predicted that property prices could fall by up to almost eight per cent by the end of the year, with Sydney units the hardest hit, tipped to drop by 7.71 per cent.
They forecast a 6.21 per cent decline in Sydney’s median house prices, which would see it fall from $930,000 to $872,242 — a drop of $57,758.
Graham Cooke, insights manager at Finder, said the cooling market could be just what some first-time buyers need to get on the property ladder.
“With the highest median house and unit price in the country, it’s not surprising that Sydney is expected to be hit hardest by the property downturn,” he said.
“If the predictions hold true, Melbourne and Sydney property still have another 6 to 8 per cent to drop this year. This means $60,000 more knocked off the average property price in Sydney.
While this makes it harder for existing homeowners to build up equity, it could make Sydney an attractive market for first-time buyers with a deposit saved.”
All but one of the experts and economists on the panel have predicted that the Reserve Bank of Australia will hold the cash rate at 1.5% when it meets tomorrow.
Nerida Conisbee, Chief Economist of REA Group, agrees.
She said that with positive sentiment trending upward for employment and stronger numbers reported in March, she could see a rate drop coming in the future, but not this month.
“While the likelihood of a cut is increasing, this month is still too early,” she said.
“If economic data continues to deteriorate, then we will likely see movement in the second half of the year.”
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