Australia is currently seeing the biggest and longest national decline in home values in 40 years, and although this trend has continued through the first months of 2019, the market may be close to reaching its trough.
Nationally, house prices fell for the 17th consecutive month; however, the month-on-month decline for March was the smallest since October 2018, indicating that the rate of decline is slowing across the nation. Property prices nationally dropped -0.7% from March to April 2019 - an improvement from -0.9% from February to March -, bringing the overall change in property values to -7.2% for the year.
Sydney, which has been hit hard by the housing slump, continued to fall in the March quarter with a 3.2 % drop in property prices reported in Sydney property market news, compared to a -2.3% decline at the national level. House prices also dropped faster than apartments in Q1, with a -15.2% decline, while apartments recorded an -11% decline. As of April 2019, the Sydney market is now down -10.95% since values peaked in July 2017.
According to experts, the drop in Sydney comes down to a variety of factors, including an oversupply of property and stricter lending criteria.
“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,” said Australian Bureau of Statistics chief economist Bruce Hockman.
While the Sydney property market continues to trend downward, experts say there are reasons to believe that house prices should stabilise and bounce back in the coming years. The predictions for the Sydney property market, according to reports from KPMG, show that prices will bottom out in Sydney in 2019 before returning to growth in 2021 – a sentiment that’s echoed by Citi economist Josh Williamson.
[There are early signs in the data that shows] the trough could be approaching,” he says. "In yearly percentage change terms, housing finance approval values are still declining but the pace of decline may have peaked.”
In addition, although some of Sydney’s more expensive suburbs are taking a hit, some of Sydney’s wealthiest suburbs – including Manly and Paddington – are recording some of the highest views per listing in NSW, and are even seeing a modest rise in property value.
The dip in housing prices also provides first home buyers with a rare opportunity to enter the Sydney property market. With house and unit values expected to continue their downward trend for the short term, and low interest rates predicted to stay, new home owners can finally buy their first property - and more affordable suburbs like Kingswood and Richmond are seeing property value increases despite lower overall demand.
Looking ahead at Sydney’s property market forecast, it’s expected that the Federal Elections will have a significant impact on house prices in the later half of 2019 – especially if Labor’s new negative gearing and capital gains policy come into effect. Through promoting financial stability by encouraging investors to chase rental yields rather than capital gains, Labor’s new policy may slow the drop, with the Grattan Institute estimating that eliminating negative gearing will lead to house price falls in the range of 1% to 2%.
Finally, although the RBA has kept interest rates flat for the 30th straight month, it’s still likely a change may be on the cards in future but this remains to be seen after the election.
"The inflation data for the March quarter were noticeably lower than expected and suggest subdued inflationary pressures across much of the economy," said RBA Governor Phillip Lowe.
"The Board judged that it was appropriate to hold the stance of policy unchanged at this meeting. In doing so, it recognised that there was still spare capacity in the economy and that a further improvement in the labor market was likely to be needed for inflation to be consistent with the target."
For more information about how the housing slump could affect the price of your home, and the latest median house price by suburb in Sydney, get started with a free online property report from Upside today.