The attached note looks at the outlook for house prices and revises our forecasts. The key points are as follows:
- The combination of the removal of the threat to property tax concessions, earlier interest rate cuts, financial help for first home buyers and APRA relaxing its 7% interest rate test points to house prices bottoming earlier and higher than we have been expecting.
- As a result, we now expect capital city average house prices to have a top to bottom fall of 12% (of which they have already done 10%) rather than 15% and to bottom later this year.
- However, given still high house prices and poor affordability, still very high debt levels, tighter lending standards and rising unemployment a quick return to boom time conditions is most unlikely.
The negatives weighing on Australian residential property prices remain significant but the past few weeks have seen a number of developments that suggest that prices could bottom earlier and higher than we have been expecting. The election outcome removed a key threat, but several other factors also help. This note looks at the key issues.
The biggest home price fall in the last 40 years
According to CoreLogic data, capital city dwelling prices are down 9.7% from their September 2017 high, which is their worst decline in the last 40 years. Of course, there is a huge range here with prices down from their top by 15% in Sydney, 11% in Melbourne, 28% in Darwin, 18% in Perth, 2% in Brisbane, less than 1% in Adelaide and at record highs in Canberra & Hobart.