Property prices have continued to fall across Australia, dropping a sharp 2.4 per cent in the three months to December.
That led to a 5.1 per cent fall for the whole of 2018, according to the Australian Bureau of Statistics’ Residential Property Price Index, released on Tuesday.
Following the latest figures, experts have warned that it could be a while until the real estate slump eases.
Across the country, prices are now falling faster than they did during the GFC, when Australia – along with most of the world – was in the grip of a crippling economic crisis. Prices fell by 4.6 per cent in early 2009.
The December 2018 quarter drop was greatest in Sydney, where home prices fell by 3.7 per cent, and in Melbourne, which recorded a 2.4 per cent fall.
The downturn wasn’t confined to Australia’s two largest cities. Brisbane had a 1.1 per cent drop, Darwin 0.6 per cent and Canberra 0.2 per cent. Values increased 0.1 per cent in Adelaide and 0.7 per cent in Hobart.
ABS chief economist Bruce Hockman said the Sydney and Melbourne markets had been hit hard by reduced demand and tighter bank lending.
“While property prices are falling in most capital cities, a tightening in credit supply and reduced demand from investors and owner-occupiers have had a more pronounced effect on the larger property markets of Sydney and Melbourne,” he said.
The fall follows a period of huge growth, during which Sydney prices lifted by 68 per cent in the five years to October 2017, while Melbourne recorded a 54 per cent increase in the same period, according to ABS data.
In the final quarter of 2018, the total value of the nation’s 10.3 million residential dwellings fell $133 billion to $6.7 trillion.
While 42,600 residential properties were added to the total stock across the country, the average price of residential dwellings dropped by $15,700 to $651,100 in that period.
Further declines to come
Sydney and Melbourne house prices are on track to suffer their biggest fall since 1965, according to recent analysis from BIS Oxford Economics.
Analysing the five property cycles since 1965, BIS senior manager Angie Zigomanis said Sydney and Melbourne prices had fallen faster than historical benchmarks and would continue to slide in the year ahead.
In both cities, property values have fallen faster than in previous downturns.
In Sydney, the average downturn lasts 14 quarters, and the average total of real house price decline in each is 21 per cent. The current downturn is six quarters old, but median prices have already dropped 16 per cent.
In Melbourne, the average downturn lasts 11 quarters, and the average real house price decline is 15 per cent. The current downturn started in December 2017 and real median house prices have already fallen 14 per cent, with more falls anticipated.
“It is foreseeable that the current downturn in the Sydney and Melbourne markets may have at least another year to run before reaching the cyclical trough,” Mr Zigomanis said.
In the context of previous market downturns, prices in the Sydney and Melbourne markets are likely to continue to decline in 2019, particularly given the constrained availability of credit and ongoing weakness in investor demand.”
Hobart, Adelaide and Canberra were the only markets to record positive growth in 2018, but Mr Zigomanis said that might be short-lived.
“The Adelaide market has not participated in the east coast upturns and prices continue to hold up there given that households are unlikely to have been too stretched to begin with,” he said.
“Meanwhile, solid economic conditions and population growth in Hobart and Canberra are driving the market in these cities.
“However, the modest growth in the index in Hobart in the December 2018 quarter and fall in Canberra suggests that the rises in these markets is now running its course, with price growth to potentially flatten out over 2019.”