Australian house prices continue to fall according to the CoreLogic home value index. Nationally, prices fell by 0.4%.
House prices fall
It was a difficult August for Melbourne, where prices dropped another 1.2% – although transactions were largely paused due to the stage 4 restrictions. Melbourne prices are down 3.5% over the past three months.
Sydney prices saw a 0.5% decline over the month. Brisbane was the only other city to register a decline with a 0.1% drop in August 2020.
Looking at the other cities – Adelaide and Perth house prices were flat. Hobart house prices grew 0.1%.
There were two standout performers. Darwin house prices went up 1% and Canberra house prices grew 0.5%.
Tim Lawless, CoreLogic’s head of research, said: “Following a similar decline in July, Melbourne home values fell by 1.2% in August, the largest fall recorded amongst the capital cities, demonstrating the impact of a worse viral outbreak relative to other cities, along with a larger demand side impact from stalled overseas migration. Through the COVID period to date, Melbourne home values have fallen by 4.6%.”
Summary
Falling house prices in Melbourne and Sydney is bad news for banks like Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) because it raises the prospect of bad debts if a property is sold but the sale price doesn’t cover the remaining loan. The CBA share price is down 2% and the Westpac share price is down 2% as well.
But banks are being careful, they don’t want forced sales, that’s bad for the economy and bad for profit. If you wanting to generate capital gains relating to property I’d rather buy ASX growth shares like REA Group Limited (ASX: REA) or Brickworks Limited (ASX: BKW).
