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Signs Sydney, housing prices in Melbourne may fall further

Perhaps you have heard rumors that the housing market is about to come out that prices have fallen at last and that now is the time to buy.

It will be easy to get excited, get your deposit and finally get immersed. But is it still too early? Be careful.

Because there are some signs that housing prices are falling in Sydney and Melbourne. Earlier this year, the fall in house prices is easing. But latest data suggests that the fall in prices has rebounded late in April / early May.

The following chart uses a daily home index created by CoreLogic. As you can see, the rate of falling house values ​​varies. At one point, the Sydney values ​​are falling so fast that if they keep for one year, the values ​​will drop by 25%. In other cases, they fell at a rate equal to the annual decline of only a few percent.

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From New Year until the end of April, the fall rate seems to decrease. The decline was getting slower and more tender. You can see that the line is steadily increasing to zero. The values ​​in Melbourne even seemed to have been rising for a short while as the dark blue line was above zero.

But at the end of April, something changed. The fall of Sydney seemed to accelerate. And Melbourn also dived.

The Adelaide, Brisbane and Perth models are slightly different. Perth's values ​​fall hard by the end of February before moderating. The Adelaide's house values ​​are mostly stable and Brisbane actually seems to have been a little easing the rate of decline in prices over the past few weeks.

It's important to understand CoreLogic's daily data behind the above graphs. The index uses sales price information to derive values ​​for all houses, including those that are not for sale. This means that this index is an estimate of the value of all dwellings, not just those of the market. It is updated daily with not only sales data, but also changes in existing homes, e.g. new apartments or old houses were destroyed.


Data can tell us what happened, but it can not tell us what we really want to know – the future. So prices will continue to fall or the market will recover? There are many moving pieces. One support for house prices is that the RBA is likely to cut interest rates. This should make mortgages cheaper and allow people to spend more on their homes.

But look deeper. The reason RBA will cut interest rates is because the economy shows signs of weakness. Thursday showed the latest unemployment figures that showed rising unemployment, rising incomplete employment and a mix of full-time part-time jobs.

With record household debt, poor wage growth, and now also rising unemployment, it's hard to see how much enthusiasm will be for spending big estate.

Another important factor affecting housing prices is politics. The workers promised to make two policy changes – to negative tying and capital gains tax – that could also affect the real estate market.

Their goal is to make housing more accessible. If labor won the election, their new policies will begin on January 1, 2020. This may cause some people to try to rush into property before the changes take effect early next year, creating the emergence of a strong market before gravity to stay again.

The effect of these policy changes is unlikely to be large in general but may affect certain types of ownership. Work will put an end to the negative arrangement only on existing properties. This will probably reduce investor demand for these properties and increase investor demand for new homes. With less competition for these types of property, prices in this category could fall and more existing homes could be in the hands of the owners.

It is time to observe the housing market. Everything can happen. If you buy or sell, you should pay attention – as the graphs above show, market trends can change very, very quickly.

Jason Murphy is an economist. He writes the blog Thomas Thinking Engine.

Continue the conversation @jasemurphy

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