According to data from property industry analysts CoreLogic, Australian house prices fell in the three months to June 30th, making it nine months of consecutive declines.
In the 2017/2018 financial year (which ends June 30th), Sydney house prices fell 4.5%, reaching a median value of $870,554. However, Sydney house prices are still well above their levels just a few short years ago.
Melbourne house prices fell 1.4% during the quarter but rose 1% annually.
While Corelogic’s Tim Lawless said first-buyers were providing some relief for affordable housing in Australia’s largest cities, regulatory concerns and slower investment activity may have hurt prices.
“Tighter finance conditions and less investment activity have been the primary drivers of weaker housing market conditions and we don’t see either of these factors relaxing over the second half of 2018, despite APRA’s 10 per cent investment speed limit being lifted this month,” Lawless said.
APRA recently removed the restriction on banks to limit their lending to investors to 10% per year and replaced it with standards focused on lending standards.
The best-performing capital city during the quarter was Hobart, up 2.3%, while Darwin remains the highest yielding at 5.7%. Year-over-year Hobart house prices rose 12.7% CoreLogic said.
Negative Equity
Over the past 20 years, investors and homeowners have become accustomed to rising house prices and growing ‘equity’, which is the difference between the price of the house and the debt.
Mr Lawless said the recent falls may highlight the idea of negative equity, when the debt is greater than a property’s value, once again.
“This highlights the wealth creation that many home owners have experienced over the recent growth phase, but also the fact that recent home buyers could be facing negative equity.”
As we wrote here, “First Home Buyers: Don’t Sweat It”, some analysts, including those from Australia and New Zealand Banking Group (ASX: ANZ), expect further declines in Australian house prices.
Indeed, there will come times when house prices rise and fall, sometimes for longer than many of us care to acknowledge.
As always, when you’re considering purchasing a property, it pays to:
- Be honest with yourself and know your limits on borrowing
- Have a cash buffer to cover emergencies
- Consider insurance protection in case of injury or illness
- Be patient when making a decision
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