The current uncertainty in the economic market has spread to Australian homeowners, with many now concerned that the market is too “thin” to risk selling their properties in case they are unable to secure a new dwelling.
New data that stems from Westpac’s August 2018 Housing Pulse report has determined that the percentage of houses bought and sold has not been so low since 1990.
Westpac’s report shows that the number of properties currently selling compared to those as a whole has dropped to just above 4%.
Matthew Hassan, Westpac Senior Economist, said that although the number of listed houses is on the rise this year so far, with an additional 11,000 houses on the market, the overall proportion has dramatically lowered.
Hassan described this as a “moderate overhang of stock accumulating at a moderate pace” but said that the low percentage was down to the fact that sales are continuing to stay weak and are not looking to increase anytime soon. This is also leading to an increase in the number of dwellings available on the market, as supply currently outstrips demand.
The report suggests that Australia has not yet hit its lowest peak in how long it takes to sell each housing unit on average, which plateaued in 2012 at half a year. However, the figure is still around five months, which is one month more than the historical average.
Hassan also said that the stricter loan criteria introduced in the wake of several financial misconduct scandals revealed in the ongoing Royal Commission inquiry has had an effect.
Some mortgage brokers are facing criticism for taking on volume-based commissions rather than a net amount of each mortgage, and lending rates that were somewhat toxic and likely to result in defaults.
Other stories emerged that painted the sector in a bad light, and in a bid to regain some of the dissipated public trust, regulators have increased scrutiny in terms of acceptable mortgages. This has naturally had a knock-on effect on available rates for consumers.
Prices have also continued to drop after hitting a peak last September and are down 3.3% since then. This is concentrating in key areas that have previously experienced strong growth, including Sydney, Melbourne and Perth, all of which appear to be seeing clear corrections in the market.
Hassan said that Brisbane was the only major capital city not to see a decline in house prices in July, while stabilization has also occurred in Adelaide. Hobart has seen a double-digit bounce in prices, meanwhile, which was due to low levels of housing stock that allowed the market to bump up the average price quite steeply.
Westpac also announced today that it is set to hike mortgage lending rates, citing increases across the board in wholesale funding costs. The fact that the second-largest bank has done this for the first time for four years means that others are likely to follow suit.
While this is an out-of-cycle rise, the current economic uncertainty alongside the Royal Commission inquiry fallout has led to somewhat of a perfect storm that facilitates the move.
The rate increased by 0.14% and is at half the value of a typical Reserve Bank of Australia (RBA) rise, which has not shifted since 2016.