Australian house prices recorded the biggest annual fall in 23 years in the year ended March, with an improvement unlikely in 2009, economists say.
Sales prices for established houses fell 6.7 per cent in the year, the Australian Bureau of Statistics (ABS) reported on Monday. It was the biggest annual fall since the data series started 23 years ago.
House prices fell 2.2 per cent in the March quarter, which was weaker than market forecasts for a flat result. The decline was the fourth quarterly fall in a row. NAB Capital chief economist, Rob Henderson, said the housing market was still feeling the effects of 12-year high interest rates and the downturn in the economy.
“Weak house prices reflect the lagged effect of higher interest rates earlier in the cycle, the peak of 7.25 per cent still in place as recently as August 2008,” Mr Henderson said.
“They also reflect the global recession and negative local sentiment as the economic outlook clouded over. “They are a reminder that the first half and middle of 2009 will be tough for households and for business, even if a recovery in 2010 is on track.”
Perth had the biggest quarterly fall in average house prices, 3.6 per cent, followed by Sydney (down 2.9 per cent) and Melbourne (down 2.3 per cent). Three capital cities recorded rises in house prices during the quarter – Darwin (up 2.2 per cent), Canberra (up 0.5 per cent) and Hobart (0.1 per cent).
On an annual basis, Perth posted the largest fall, 10.1 per cent, while Sydney was down 7.3 per cent and Melbourne was 6.3 per cent lower in the year to March 31. Darwin (up 10.8 per cent) and Hobart (up 0.6 per cent) were the only capital cities to post annual rises.
JP Morgan economist Helen Kevans forecasts house prices to fall by 10 per cent in the current economic cycle but by less than that experienced in the US and UK housing markets. “The acute shortage of new homes and accelerating population growth will, however, prevent falls similar to those in weaker, offshore markets,” Ms Kevans said.
Mr Henderson expects the economy to remain weak until the end of 2009, which would hamper unemployment and house prices. “We expect unemployment to be around seven per cent by the end of 2009,” he said. “Rising unemployment will be bad for house prices, which we expect to fall on average by 5-10 per cent in 2009,” Mr Henderson said. Job advertisements fell 7.5 per cent in April and by 49.9 per cent over the year, the latest ANZ job ads survey released on Monday showed.
The weak ANZ jobs data comes ahead of the labour force report for April, due for release by the ABS on Thursday, May 7. Market forecasts are for a loss of 25,000 jobs in April and the unemployment rate to rise by 0.2 percentage points to 5.9 per cent.
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