In Australia, property markets were keenly watched during the September quarter as national house prices fell 2.7% over the last 12 months.
This decline was led by previous market leaders, Sydney and Melbourne, which dropped 6.1% and 3.4% respectively over the period.
What has prompted the decline in property prices?
There are several reasons for the decline in house prices, with the major factor being higher mortgage rates. ANZ, Westpac and the Commonwealth Bank of Australia (CBA) and some
Lending standards have also been tightened in response to both the regulator, the Australian Prudential Regulation Authority (APRA), and in anticipation of changes forthcoming from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. This tightening of standards has made it more difficult for people to get a home loan. The reduction in borrowing means there is less money to sustain continuedgrowth in house prices.
An excess in the supply of new apartments and softer immigration numbers has affected unit prices in the important markets of Sydney, Melbourne and Brisbane.
What is the outlook?
The decline in housing financing coupled with weak income growth and tight lending standards will likely continue
to act as headwinds for house prices going forward.
Also, if a global economic shock leads to higher unemployment in Australia this could trigger loan defaults and foreclosures. This would further exacerbate price declines.
However, if immigration continues at strong levels or wage growth improves, households may be able to bid up house prices once more. This is unlikely to eventuate as wage growth remains subdued. Also, immigration growth may be curtailed in the future given the populist trend to reduce immigration being seen in politics at State and Federal levels.