Fall in house prices ‘larger than expected’
ONE of Australia's biggest banks has backflipped on a previous prediction that housing prices were going to pick up.
In a research note published yesterday, ANZ Bank has warned the steady decline in the country's housing prices wasn't only going to keep dropping, the pace of the decline was also going to pick up.
ANZ senior economist Daniel Gradwell said the "weakness in Australia's housing market has persisted longer than we expected, and the rate of decline in prices has recently accelerated".
Mr Gradwell attributed a number of things to the fall in housing prices, including the shift away from interest only loans and tightening on credit in the wake of the royal commission.
Those changes in customer behaviour suggests "the fall in house prices will be quite a bit larger than we previously expected, with recovery coming later," Mr Gradwell said.
In the past 10 months, nine of those have seen lower housing prices, according to CoreLogic data.
Across some of the capital cities, Sydney has seen some of the worst price drops.
In July 2017, houses in Sydney were selling for 4.2 per cent more than they are now.
And while Melbourne initially fought the slump in housing prices, the Victorian capital has now seen worse price falls than Sydney in the past three months.
But it isn't all bad news across Australia - homes in Canberra and Hobart are selling for more than they were a year ago and the post-mining slump in Perth is easing.
National auction clearance rates are the worst they've been in five years.
In February, 66 per cent of homes were selling at auction but in May, that clearance rate was 58 per cent - the worst month since January 2013.
While things aren't as good as they were last year, Mr Gradwell said it was important to note that "these movements pale in comparison to previous cycles".
In the wake of the banking royal commission, where dozens of Australians spoke about being given loans they were not in any position to pay off, banks are expected to tighten their lending standards.
Mr Gradwell said it was the landmark royal commission - which directly impacted the availability of credit - that was the "primary driver" behind the slowdown of housing prices.
The ANZ senior economist forecast the market will have stabilised by the end of the year, hoping our strong population growth and record low interest rates would directly influence and lift housing prices.
Australia's home building boom also appears to be running out of steam - a direct reaction to the nation's housing price downturn.
On an annual basis, housing prices are in reverse for the first time since 2012.
National housing prices fell 0.1 per cent in May, taking the annual loss to 0.4 per cent, which was the first time values have fallen on annual basis since October, 2012, according to property data firm CoreLogic.
CoreLogic head of research Tim Lawless said tighter credit availability and a high number of units being built despite weakening foreign investor interest are key factors behind the decline.
"The most significant driver of this turnaround has been tighter credit availability, particularly for those borrowing for investment purposes," he said.
"Additionally, a high number of units remain under construction, with demand impacted by fewer foreign buyers and less domestic investment in the market."
- With Wires