Startling new figures from property data specialists Corelogic revealed that a whopping three-quarters of all Australian homes lost their value in the three months leading to October 2018. The figures showed that these homes sold for less than their purchase price.
The Australian housing market has been in an overall decline for some time, but Corelogic’s report is one of the first instances that highlight just how much of a problem that this has become.
When he first came to power, Prime Minister Scott Morrison said that he believed it was necessary for house prices to come down so that homes could be more affordable for the average Australian. He stressed the need for this to happen gradually so that the markets could adjust. Otherwise, he speculated that a crash might occur, and he did not want this to happen deliberately.
Major cities such as Melbourne and Sydney were among those where house prices dropped somewhat significantly. The new figures suggest that many homeowners are not prepared to ride out this decrease in their homes’ value and would rather sell than wait any longer to see if the prices change in the next few months.
Corelogic suggests that this is due to several factors and not just that homes have become unsustainably unaffordable for much of Australia. This has led to investors backing away from the housing market, as houses are no longer a safe asset to acquire. Lenders have become reticent to approve larger loans and mortgages because households are not maintaining their value.
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All these issues have caused homebuyers to refuse to pay what they believe are prices over the odds. They are now offering less than homes’ estimated values from just a few years ago.
Only 17.6% of the houses sold over the last three months shifted for a profit, and another 7% sold at an equal value to their purchase price.
One main driver for these figures is Melbourne, where the build-up of homes declining in price is at an impressive 76.3%, the highest that this figure has been for over 12 years. In Brisbane, meanwhile, Corelogic found that 65.7% of properties sold for a sizable 20% less than the last time that deeds exchanged.
Sydney is struggling the most, as 83.3% of households have sold for less than their original cost. This represents a bigger drop than last year, and real estate vendors are having to price houses down 7.3% on average to sell them. This figure was at 5.4% only a year ago.
A perfect storm of conditions appears to be weakening the Australian housing market further, as a potential drop in profits for the big banks led many of them to raise mortgage rates. This was due to the Royal Commission inquiry into financial misconduct pummeling the banks’ profits.