Homebuyers ‘face negative equity
NATIONAL house prices have fallen for the ninth consecutive month and are now 1.3 per cent lower than their September 2017 peak, leaving recent home buyers "facing negative equity".
CoreLogic figures released on Monday show dwelling values fell 0.2 per cent in June, bringing the decline to 0.8 per cent over the year. Despite the falls, prices remain 32.4 per cent higher than five years ago.
"This highlights the wealth creation that many homeowners have experienced over the recent growth phase, but also the fact that recent homebuyers could be facing negative equity," CoreLogic head of research Tim Lawless said in a statement.
"Tighter finance conditions and less investment activity have been the primary drivers of weaker housing market conditions and we don't see either of these factors relaxing over the second half of 2018, despite the Australian Prudential Regulation Authority's 10 per cent investment 'speed limit' being lifted this month."
The national median house price now sits at $556,384. Sydney's median value fell 0.3 per cent to $870,554 in June, Melbourne fell 0.4 per cent to $716,774, Perth fell 0.5 per cent to $461,149, Darwin fell 1.1 per cent to $433,309 and Canberra fell 0.3 per cent to $587,867.
Meanwhile, Brisbane's median value increased 0.2 per cent to $495,242, Adelaide increased 0.3 per cent to $439,215 and Hobart increased 0.3 per cent to $436,899. Hobart remains the country's best-performing housing market, with prices now 12.7 per cent up over the year.
CoreLogic said the declines were more pronounced across the most expensive quarter of the market, largely due to Sydney and Melbourne where the upper quartile of property values have fallen 7.3 per cent and 2.5 per cent respectively over the past 12 months.
"A surge in first homebuyer activity has helped support demand across the more affordable price points in these cities," Mr Lawless said. Spurred by stamp duty concessions, activity in this segment peaked in November, however, and has continued to wane.
While the Reserve Bank is expected to keep the official cash rate on hold at its record low of 1.5 per cent until 2019, Mr Lawless said there was growing pressure on lenders to lift mortgage rates due to higher overseas funding costs.
"Smaller banks and non-banks have more exposure to international funding costs, which has seen some of these lenders start to lift their mortgage rates," he said. "Should widespread increases to the cost of debt occur, we would expect this could place additional downward pressure on housing market conditions."
According to comparison website Mozo, a large number of lenders jacked up their variable home loan rates in June. Auswide Bank added 5 basis points, Beyond Bank 6 basis points, Citi 10 basis points, IMB 8 basis points, QBank 6 basis points, Bank of Queensland 9 basis points, Heritage Bank 6 basis points and ING 10 basis points.
CoreLogic warned that despite the recent slippages, dwelling prices in Sydney and Melbourne remained relatively high compared to other capital cities.
"With lenders now focusing more on overall debt-to-income ratios and household living expenses, housing markets where prices are high relative to incomes could see less activity as prospective buyers find their borrowing capacity reduced," Mr Lawless said.
"Additionally, with the federal election campaign imminent, we could see investor confidence impacted further if changes to taxation policies related to investment housing are debated."
Last month, ANZ said it had "materially downgraded" its outlook for the housing market and now expected to see declines of "around 10 per cent peak to trough" in Sydney and Melbourne.