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BFCSA: Latest property price figures unwelcome news as auction market kicks back into gear

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Latest property price figures unwelcome news as auction market kicks back into gear

Australian Financial Review 01 Feb 2019 5:27 PM

Ingrid Fuary-Wagner

 

The country's auction market will kick back into action this weekend after a summer hiatus but it coincides with more unwelcome news for homeowners who were hoping to see the back of the property downturn in 2019.

About 500 homes are scheduled to go under the hammer across Australia but sale results are expected to remain lacklustre in February and beyond with the housing slump gaining momentum at the start of this year.

Price falls in Sydney and Melbourne accelerated over the past three months, with dwelling values down 4.5 per cent and 4 per cent respectively and dropping 1.3 per cent and 1.6 per cent over January alone, according to CoreLogic's home value index.

The downturn, which had centred primarily around Sydney and Melbourne, is also starting to spread geographically with every capital city except Canberra recording a fall in prices over the past month, including Hobart where values declined slightly by 0.2 per cent, after a surge in prices by 20 per cent in the last two years alone.

Property values fell 1.7 per cent in Darwin and 1.1 per cent in Perth last month while prices in Adelaide and Brisbane prices dropped by 0.3 per cent. Canberra was the only capital city where prices didn't fall, growing 0.2 per cent in January and 0.8 per cent over the past three months.

National property prices are now 6.1 per cent lower than they were when the market peaked in October 2017.

While the number of auctions scheduled will pick up by mid February, this weekend will give buyers and sellers a taste of the current power balance, with the majority of homes going under the hammer spread across Melbourne (151), Sydney (115) and Adelaide (105).

"I think we'll see a continuation of what we saw in December – auction clearance rates might improve slightly purely because we might see fewer homes being taken to auction," CoreLogic's head of research Tim Lawless said.

By mid-December, only four in every 10 homes across the country were selling under the hammer. The number of new listings in Sydney in January fell by 20 per cent over the year while the total number of listings grew by 20 per cent as old stock lingers on the market. Canberra had the biggest drop-off in listings, with the number of homes for sale down by 31.7 per cent compared to the same time last year.

"Sydney is now down about by 12 per cent and I expect values will drift lower this year," Mr Lawless said. "In Sydney the largest downturn had been during the last recession when values fell 9.6 per cent between 1989 and 1991 … so we are well and truly in new territory." [No mate, it’s not new—you just need to go back to 1893. –RJB]

'There are no signs of improvement in the market'

"I expect there will be a lot of properties pulled from auction or postponed," said Sydney-based buyer's agent Lauren Goudy. "There are no signs of improvement in the market."

According to Ms Goudy, sales campaigns were often running over five or six weeks, rather than three or four weeks a year ago and the number of days properties were on the market had blown out from 18 months ago.

While the price falls were good news for her clients – a growing cohort of first-time buyers hoping to get a foot on the ladder – they now faced a catch 22.

"It's a bit more positive for buyers in the current market than it was this time last year. But while the market might no longer be the issue the problem is not being able to get finance and that's not going to get any easier," Ms Goudy said.

"People who could have once borrowed $1 million might only be able to borrow $800,000."

Last year banks began tightening their lending criteria to borrowers after they were called into question during the Hayne royal commission. The commission's final report, to be released on Monday, could see lending curtailed further if it is found banks aren't doing enough to check customers' expenses and their ability to repay a loan.

UBS analysts expect a 10 per cent peak-to-trough fall in national property prices but warned the risk of an even bigger slump had increased since APRA had effectively ruled out further macroprudential easing.

"If there is a policy maker desire to support housing, given increasing evidence of a negative spill over to the rest of the economy, it would need to cut via the RBA cutting the cash rate," the analysts said.

'There are still buyers'

The number of property sales had also collapsed by 16 per cent year on year to the lowest level in 21 years, UBS said.

Mathew Tiller, head of research at LJ Hooker, expected auction clearance rates over the next few months to remain at about the same low levels seen in the second half of last year.

"Even though auction clearance rates have come off the highs we saw early last year and in 2017, there are still buyers out in the market," Mr Tiller said.

"There's been a slowdown in investor demand but first home buyers and owner-occupiers have started to move into the market to take up the slack and we've seen that in the housing finance figures over the past quarter and over the year.

"When you look at the fundamentals behind NSW and Victoria, unemployment is low, the economy is still growing, interest rates are low, so it's not like people aren't looking to upgrade."

In Melbourne, selling agent Paul Caine said his agency had had the biggest January for sales in 10 years.

"Some of our properties have barely lasted a week on the market – but it's about having a frank discussion with sellers about what's realistic and what's not. We are seeing some relatively prompt decisions being made on both sides with sellers pricing appropriately and buyers finding value," Mr Caine said.

Several economists expect property prices to fall further this year, including AMP Capital's Shane Oliver who forecasts a further decline in Sydney and Melbourne of about 15 per cent.

Mr Lawless anticipated further price falls this year of between 3 and 6 per cent in Sydney and around 6 per cent in Melbourne.

 

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