Sydney’s inner southwest has staged a dramatic real estate reversal in recent weeks, morphing from a booming market into the city region with the sharpest home price falls.
Figures from PropTrack revealed prices across the area, which includes much of the St George and Canterbury-Bankstown regions, tumbled by nearly 3.2 per cent over the past three months.
This fall eroded most of the market gains over the past year, when interest rates were much lower, with prices in the region now an average of 0.3 per cent lower than a year ago.
The last three months of price falls – the largest across the Greater Sydney area over the period – have been attributed to falling investor demand and uncertainty over recent government tax reforms.
MORE: Users of Albo first-home scheme going bust
Auction clearance rates in Sydney have been below 50 per cent, a figure that correlates with price drops, for seven weeks in a row. Picture: Tom Parrish
The reforms included restrictions on negative gearing and capital gain tax changes that were announced in the May federal budget and passed through parliament last week.
REA Group economist Anne Flaherty said these changes pushed many investors out the market and the most noticeable impact was in areas that had attracted higher demand from aspiring landlords.
Sydney’s inner southwest had, until recently, been a magnet for investors chasing higher rental yields.
Many of these investors relied on negative gearing tax benefits to support their holding costs, which are now no longer available for established dwellings, only new builds.
The result has been a sharp pullback in investor demand, and when investors step back in markets where they’ve played a major role, prices can move quickly.
MORE: Aussie homeowners ‘owed $1bn in refunds’
REA Group economist Anne Flaherty said many buyers felt uncertain about the current economic climate.
Ms Flaherty said the damage hasn’t been limited to landlords and speculators.
“There is also an expectation among home buyers that prices will continue to drop and that’s made a lot of them hesitant to buy,” she said.
Ray White chief economist Nerida Conisbee said uncertainty around tax reform has rattled many owner-occupier buyers.
Many who would have bought homes were increasingly wary about stepping into a falling market before knowing where policy and prices will land, she explained.
That hesitation is now becoming a market force in its own right, with many buyers choosing to hold off purchasing until they feel more confident about the market, Ms Conisbee said.
Others were shelving their plans altogether until there was more certainty about how the new tax settings will affect values.
MORE: Bombshell immigration finding exposed
Treasurer Jim Chalmers announced the tax reforms with the release of the May federal budget. Picture: Martin Ollman
It has created a vicious cycle: fewer investors, nervous home buyers, weaker competition at open homes and more pressure on sellers to cut expectations.
Sydney dwelling prices, based on sales of units, townhouses and houses, have fallen by an average of 2.5 per cent since this year’s first of three interest rate hikes in February.
English (US) · 