Australia's $133 billion property price slide rapidly becoming the worst in modern history

Figures from the Bureau of Statistics show Sydney and Melbourne continued to lead the falls, with a 3.7 per cent and 2.4 per cent fall respectively.

There were smaller quarterly falls in Brisbane (-1.1 per cent), Perth (-1 per cent), Darwin (-0.6 per cent) and Canberra (-0.2 per cent).

Adelaide (0.1 per cent ) and Hobart (0.7 per cent) were the only two capital cities where prices rose in the final three months of last year.

Hobart was the only city to record a large property price rise in 2018 (9.6 per cent), while Canberra and Adelaide home values edged higher.

Every other capital fell, led by Sydney's 7.8 per cent slump, with Melbourne not too far behind.

"Investors were a key driver of price growth through their upturns and the fall in investor demand is now underpinning the decline in prices," BIS Oxford Economics senior manager Angie Zigomanis said.

House prices falling rapidly as downturn spreads beyond Sydney and Melbourne

 

Scary bit is that they are basing these drastic conclusions on December quarter and March quarter has worse numbers!

 

Its easy to predict what the data is going to do when the data is lag indicator...

 

Not a great quarter for Brisbane (-1.1%)

First we got no boom because the regulators shut down lending after Sydney and Melbourne has their big run up, and now we are getting dragged down by reversing sentiment in the southern capitals as well.

 

The million dollar question would be how far or how long will it drop? Throughout this year?

 

Bri$banite$ still got moolah to spend when they like something.

84 Harold Street, Holland Park, Qld 4121

 

Let’s call it a $700k question due to correction!!

 

$650k.

 

What has been most disconcerting/interesting is the speed of the adjustment. Sydney dropped in 1 year what took Perth 5 years to fall. This is quite astounding, and more like a big "bath".

But it makes sense when we think that the correction has not been driven by economic factors (as is the case in Darwin/Perth), but a regulator lead revision in the rules about serviceability.

What this means to me, is that property prices will (and have) sharply adjusted to the new lending standards as a one off, and then re-set their course.

If we had higher unemployment for example, I would agree that prices would grind lower for longer, but this seems to be to be an adjustment.

Not sure if anyone saw it, but Pete Wargent put some charts up yesterday showing Sydney as the worst performing capital city since 2003. It raises the question around price vs value: just because Sydney (for example) is the most expensive city, doesn't make it the biggest bubble. Thoughts?

 

China money ($70bn in 2016) has completely dried off, interest only loans ($33bn in 2016) have halved and now the massive (and genuine) fear around complete economic collapse... add to equation RBA’s lack of willingness to do something about it and politicians from both sides more concerned about saving themselves from self fueled fires .. future does look seriously concerning!!

 

John, I agree that the with the swoop of a few pen strokes, borrowing capacity got cut and that is why we saw sharp drop.

But I think now there are quite a few other headwinds contributing, so it's anyone's guess, but I would guess we've got a fair way to go, just slower from here . Aus downturns have, on average lasted 14 quarters, we're 6 into this one. I'd be more convinced it will be short one if interest rates weren't so low already.

Jobs report comes out tomorrow.

 

Good call.

Well, here is what none of us know: what are the unintended consequences of slowing down the housing market? Because there definitely could be a knock on effect.,

I think RBA cuts are in the bag. I have heard predictions of there being two this year, and I have even read pundits talking about cuts as early as April (depending on the job number coming out tomorrow), or July for sure.

 

If rates are cut ,then its a pretty sure sign that the country might be heading into a recession .
And as the RBA said recently the previous big cuts in rates is what fuelled big price rises in Sydney and Melbourne , so they may be very cautious about dropping rates further.
With rates at the current levels , it certainly is not going to stimulate the economy any further by going lower.
Just really a feel good exercise, especially for those sitting on big piles of debt.
The only savior would really big pay rises.
But i think its going to be house prices that are going to get hit.
Most businesses certainly dont want to see a wages explosion over the next 5 or 6 years.

 

Not really. Lower rates would help people pay down debt quickly while still unable to take on further debt due to current credit restrictions.

 

Its consumer spending , or lack of it thats causing much of the probems , its like watching a dog chase its tail , but unlike a dog that usually stops after a while , lack of spending ,especially in retail and discretionary goods causes more problems than it solves .
Its hard to climb out of and gets even harder over time.
Dropping interest rates was the easy bit.
Getting them back up to realistic levels is proving to be a lot harder.
The RBA had dropped rates by over 300 pts and the domestic economy is still struggling , to the point that rates may be dropped again.
We have almost reached the point when it is no longer of any use.

 

You are right Marmot. The challenge is not the rates, it is the velocity of currency in the economy that is the problem.

The analogy I like to use is that the RBA is at the tap, pushing the water through the hose at full tilt. But APRA has kinked the hose so the water can't get through. The water will probably spill out violently some how, creating all sorts of unforeseen problems. Perhaps higher rents?

I think the RBA will lower rates, but if APRA is still kinking the hose, it's hard to see buyers come back. Lower rates will push down repayments though and will also reduce defaults and reduce the cash flow burden on P&I arrangements. They will do it, and it will help a little. But they are essentially fixing a problem that they created. Ah, central banks.

 

And then you’ve got the ALP in the background threatening to redirect most of the flow from the hose to themselves, presumably to fill up their mates swimming pools (Industry super funds, CFMEU etc)

Libs have been flogging themselves with the hose and have basically let it go, spraying themselves in the face and crotch.

Greens are doing what they know best, cutting short lengths off the hose for bong pipe.

 

The elephant in the room is lack of wage growth since 2012.
If wage growth was still running at 1-2% above inflation , no one would really care, and banks would still be writing out bigger and bigger loans , in the safe knowledge that every year most workers would get an extra $1000-$2000 in their pay-packets, every year , above inflation.
Everything that is happening at the moment regarding cost of living and the expenses can be traced back to the last 6-7 years of non existent wage growth.
Everything else that is happening is just a consequence of that.
Made even worse by the RBA dropping rates by over 300 pts, lots of cheap and easy money which saw massive price rises in Sydney and Melbourne, and tax policy that encouraged everyone to load up with debt , all while we were seeing immigration levels really take off.
Unfortunately it took about 5 years to realise what was happening with wage growth , and if you believe the latest reports it might be 10 years at least with flat wage growth.

 

I doubt there will be any wage growth as long as mass immigration is the rule of the (business) game

 

This is unrelated to the point. But I hate when we use “biggest” in terms of dollar value.

Inflation may be low but if Every 10 years we had a 5% decline, they will each be the biggest. Where relatively they are the same.