https://www.businessinsider.com.au/australia-property-market-house-prices-downtu... Quote:Australian home prices have fallen for 10 months, but this economist warns the worst is yet to come
Australian home prices fell faster, and in more locations, during July, suggesting weakness in Sydney and Melbourne is now starting to impact values in other parts of the country.
According to CoreLogic’s Hedonic Home Value Index, Australia’s median home price fell 0.6% to $554,263 last month, the largest percentage fall in close to seven years.
The acceleration, significantly faster than the 0.2% decline reported in June, left values down 0.9% over the past three months, and 1.9% over the year.
The annual decline was the fastest in six years, largely reflecting that prices in Sydney and Melbourne have both fallen over this period, dropping 5.4% and 0.5% respectively.
In the past three months alone, Melbourne’s median price has fallen 1.8%, outpacing a 1.1% slide in Sydney. Three of Australia’s remaining six capitals — Perth, Darwin and Canberra — as well as prices in regional areas, also fell over this period.
Some, such as AMP Capital Chief Economist Shane Oliver, think the Sydney and Melbourne-led price unwind is just getting started, forecasting that prices in both cities are likely to fall by another 10 to 12% over the next couple of years, continuing the measured pullback after years of unrelenting growth.
Paul Dales, Chief Australia and New Zealand Economist at Capital Economics, shares a similar view to Oliver, suggesting his “relatively bearish” forecast that prices will gradually fall by 12% from peak to trough is “starting to look a bit optimistic”.
Based on the latest data provided by CoreLogic, Dales thinks the worst is yet to come.
“Prices in Sydney fell by 0.8% in July after seasonal adjustments, and are 5.4% below their peak and falling at a three-month annualised rate of 6.6%,” he says.
“In Melbourne, prices dropped by a larger 0.9% in July and for the first time since November 2012 the annual growth rate turned negative.
“Prices in Melbourne are still only 3.0% below their peak, but they are now falling at a three-month annualised rate of 8.3%.”
So the declines are getting steeper, a trend that Dales believes will continue.
“Most worrying is that prices will soon be falling at an even faster pace,” he says.
“The further decline in the number of home sales in March — the latest month of reliable data — to a seven-year low was larger than the fall in the number of new listings.
“In other words, demand is deteriorating at a faster rate than supply is improving.
“That suggests house prices in the eight capital cities will soon be falling by 5% a year.”
The chart below from Capital Economics shows the ratio of capital city sales to new property listings on a three-month moving average basis, overlaid against annual changes in capital city home prices. The former has been advanced by eight months to show the relationship between the two measures.
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