National property prices drop for first time in almost two years

ABC NEWS (Australia)

Australia's property market is in a downturn for the first time in almost two years. However, this fall in value at a national level is masking a two-speed situation. Smaller cities are still going up in price, while major ones are dropping.

Transcript

00:00House prices at a national level have dropped marginally in the month of December by 0.1%,

00:10so they're down just a sliver. This is the first time at a national level that property

00:15prices have gone down in a month for the first time in two years. That is after many, many,

00:23many years or months of gains for the property market with soaring prices right across the

00:28country. However, this national drop is just an aggregate of the various happenings in

00:35capital cities across Australia and regional Australia. And when you drill down into places

00:41like Sydney versus Perth versus regional Australia, there is a very different picture emerging.

00:47I spoke to the economist at CoreLogic which supplies this data, Tim Lawless, and here

00:54is how he explained what's happening at a more granular level.

00:58The broad theme of the housing market is values are slowing down, either going backwards

01:02or the rate of growth is slowing down pretty much everywhere. But there's still a lot of

01:06variance and variability in the statistics. So one end of the spectrum, you've got housing

01:11markets like the mid-sized capitals, Perth, Adelaide and Brisbane, where annual growth

01:16is still in double digits. In fact, Perth has seen a 19% rise in housing values over

01:21the past year. At the other end of the spectrum, you've got markets like Melbourne, Hobart

01:26and Canberra, where values are down over the past 12 months and still recording month-on-month

01:31declines.

01:32So we've now had interest rates at their highest level in 10 years for the last year and a

01:37half essentially. And despite this, property prices in some of those places that Tim was

01:42speaking about are still rising. Tim thinks, however, that now finally those interest rates

01:49are starting to hit the borrowing capacity of many borrowers. They simply can't borrow

01:55enough money to keep up with the rising prices of property and people simply can't pay anymore,

02:00he thinks. As well as this, you also have other people who own property, especially

02:06investors potentially hitting mortgage cliffs where they have had lower interest rates on

02:12fixed loans and now they're coming off those fixed interest rates into higher variable

02:17ones. This is making owning these properties unviable for some investors. I spoke to some

02:24retired couple, Mark and Candice D'Souza, who were exactly in this predicament. And

02:30they explained that this is why it forced them to sell one of their investment properties,

02:34despite the fact that they didn't get the price they were wanting.

02:37We went from about 2.4 to about 6, a little over 6%, and it just wasn't financially viable.

02:45So we had to sell one and so we decided to sell Potts Point around the middle of the

02:51year and spoke to the agent and the agent said, yeah, we'll wait till spring, it's a good time

02:57to sell and we'll go to auction, which is what we did. And it was an odd event, only one person

03:04turned up at the auction and the property got passed in. And we were looking for about at

03:10least $850 and we had to lower our expectations to around $800. And then it was on the market

03:16for a couple of months and then we finally were able to sell at $790 and settled in early December.

03:23So with CoreLogic's data showing that prices dipped nationally by 0.1% in December,

03:30CoreLogic's economist Tim Lawless says that this really does set the scene for a soft

03:34start for prices this year. However, we have the perennial factor of interest rates and

03:40what they could do to demand in the property market. Interest rates are currently at a

03:4610-year high, but some economists are predicting that the Reserve Bank could cut the cash rate

03:51as early as next month, while others are tipping for a bit later in May. And with interest

03:57rates potentially dropped, that could put a bit more heat back into the property market.

04:03After these many years of rises to property prices, this has obviously left many Australians

04:09struggling more than ever to enter the Australian property market. You have some people completely

04:15locked out at a time where rents are also very high. CoreLogic's Tim Lawless is tipping

04:21that housing will be one of the really big talking points for this year's federal election.

04:26We already have various policies trying to help out first home buyers, such as loans

04:32to get them into the market more easily. But he is tipping that this topic will only get

04:37more heated as we head into the federal election.

Category

Transcript

Recommended