In what could be seen as a worrying new trend for the Australian property market, house prices in the major capital cities continued to plummet in value to levels not seen since the global financial crisis in 2008.
Sydney and Melbourne are leading the downward trend with CoreLogic figures showing yet another drop in property values, with an average decline of 0.7% for the month of December and are on track for a national drop of 4.8%.
As conditions are set to worsen, the makings of a perfect storm appear to be brewing on the horizon. Disposable household incomes continue to be squeezed and the personal savings of mortgage holders are coming under increasing pressure.
Fallout from the Royal Commission banking inquiry has seen several mortgage lenders increase their interest rates outside of the RBA cycle, further adding to the pressure of already struggling home owners.
With battle lines being drawn in the sand ahead of the coming 2019 Federal election in May, affordability has quickly risen to become one of the key issues. Australians who continue to struggle with afordable housing are more than likely to reward politicians who campaign on the issue with large swings towards them.
Embattled Prime Minister Scott Morrison has previously addressed the issue of housing affordability, by saying on the record he is happy to see house prices coming off the boil. Yet any government interference could see negative side effects, believing it best to let the property market deflate gradually like a balloon rather than to send the economy into a deep recession.
Sydney continues to lead the country with dropping real estate values, followed by Melbourne and Western Australia. Average residential house prices in Sydney dropped -1.8% in December, -1.5% in Melbourne, and -1.0% in Perth. A disturbing trend which many economists expect to continue well into the new year and beyond.
However, not all Australian cities in December experienced a decrease in property prices with both Hobart and Adelaide bucking the downwards trend. Hobart residential house prices increased +0.4% in the month of December, with Adelaide also seeing a small rise of +0.2%.
Property industry analysts believe that the downward pressure on Australian capital cities is likely to continue well into 2019, with no signs of slowing down set to appear anytime soon. Tim Lawless, Research Director at CoreLogic, said ‘The tightening in finance conditions has been more pronounced’ and went on to say ‘owner occupier credit is now rising at the slowest annual rate since November 2015’.