Australian property prices have hit a “turning point” after initially staving off some of the headwinds that have been rattling global markets since the Iran War started.
PropTrack’s Home Price Index released Friday revealed national property prices recorded their first fall of the year over April after previously recording surprise growth over a turbulent March.
Interest rate hikes, global economic uncertainty and looming tax changes were singled out as the main catalysts for the recent price drops and experts warned a widespread housing correction has begun.
“The market has hit a clear turning point,” said REA Group economist Eleanor Creagh.
“It’s likely we will continue to see price falls or a slowing of price growth in most areas. It will be an ordered downturn, not a crash.”
Home prices falls have become widespread across areas.
The average April fall in dwelling prices was just 0.1 per cent nationally, but the headline figures masked a patchy market defined by deeper price falls in premium areas and rises in cheaper suburbs.
PropTrack reported that half the country’s statistical regions recorded a fall in prices and 80 per cent of the subregions of NSW and Victoria recorded declines.
Falls were particularly sharp in some of Sydney and Melbourne’s more expensive markets.
This included Sydney’s eastern suburbs, where dwelling prices are now close to an average of $40,000 lower than in February.
Both Greater Sydney and Greater Melbourne prices fell over the month, recording declines of 0.5 per cent and 0.3 per cent, respectively.
Brisbane, Adelaide and Perth prices continued to rise over the month, all with gains of about 0.2 per cent, but there was growing weakness in each of these markets, Ms Creagh said.
MORE: $61 homes: new scheme to boost major NSW areas
Auctioneer Clarence White said a lot of would-be buyers were “scared”. Picture: Jane Dempster/The Daily Telegraph.
“Prices are now falling in the inner city areas of these capitals,” she said, noting the citywide rises were largely the result of prices gains in cheaper, outer city markets.
Dwelling prices in all the major capitals remain higher than they were last year, which Ms Creagh explained reflected “gains earlier in the cycle”, notably when interest rates were falling last year.
Ms Creagh explained that national home price growth in March had been a “surprise” given how conflict in the Middle East had created an environment of economic uncertainty, but conditions have shifted.
“The underlying shift is broad-based,” she said. “There has been a key loss of momentum across property markets. Even in areas where prices are still growing, that price growth is slowing.”
Uncertainty about the extent of coming interest rate hikes was likely the biggest drain on buyer confidence, Ms Creagh added.
Worries about the impact of fuel shocks are weighing on buyer confidence. Picture: Morgan Hancock/Getty Images
Warnings of another hike May hike in interest rates have been growing after ABS figures this week showed another spike in inflation over March, which may necessitate more rate rises.
VanEck head of investments Russel Chesler said it was now “very likely that the RBA will increase the cash rate to 4.35 per cent” next week and signs pointed to inflation trending even higher.
“The full effect of the Iran War and the increase in the oil price continues to feed into the economy,” Mr Chesler said.
“We expect year-on-year inflation to move even higher when the figures for April are released.
“Many suppliers held off increasing prices in March, food prices are expected to continue to increase with rising fuel and fertiliser costs forcing increases in staples like bread, milk and fresh produce.”
Some of the biggest price falls were recorded in Sydney.
Clarence White, the director of auction group Menck White, said it was uncertainty that was “really pulling down” the market.
“Government is talking about tax changes for investors, rates are going up, plus there’s petrol shocks. Everyone’s scared,” he said.
“When this happens, some buyers will wait. Others remain active but pull back their spending, because they fear prices will fall. It can become a self-fulfilling prophecy.”
Mr White said vendors were also adopting a wait-and-see approach, with many withdrawing their properties from auction, or pulling their homes off the sales market altogether.
“Those vendors who are selling right now, are usually being pragmatic with price … then there’s others who are just packing up their toys and saying: ‘Right. Now is not the time’.”
English (US) · 