Australian Property Downfall March 2019 Quarterly Update
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Australian Property Downfall March 2019 Quarterly Update


Today may be April 1st, but the current downturn
in Australian property prices is no laughing matter. Data from CoreLogic has been released today
showing the fall in prices over the March 2019 quarter. Sydney is down 3.2%; Melbourne down 3.4%;
Brisbane 1.1%; Adelaide 0.5%; Perth 2.9%; Darwin had the highest percentage falls at
3.9%; where Canberra (0%) and Hobart (1.2%) were the only capitals not to fall over the
quarter. That’s a national fall of 2.3%, or 2.7%
if you just include the capital cities. Over the month of March, there was 0.6% fall
in property prices across the nation. Tim Lawless, Head of Research at CoreLogic,
stated: “Although the CoreLogic national hedonic
index series trended lower in March, the actual rate of decline has been easing over the past
three months. The 0.6% drop in March was actually the smallest
of the month-on-month declines since values fell by 0.5% in October last year.” However, the international investment banking
company, Morgan Stanley, have said that March is typically the seasonally strongest month
for Australian house prices throughout the year. The recent slowdown in house price drops is
likely due to seasonality, rather than the prospect that prices may soon bottom. They stated: “Price declines in February were less than
the average decline over the past few months, but still faster than the average seen over
the rest of 2018. This improvement is in line with the usual
seasonal trends in house prices, with December and January typically significantly weaker.” In other words, there may be a long way to
go yet. CoreLogic’s Mr Lawless said: “While the pace of falls has slowed in March,
the scope of the downturn has become more geographically widespread.” He also talked of the impact of the upcoming
federal election on property prices. He said: “Federal elections generally cause some
uncertainty, which is amplified more so on this occasion considering the potential for
a change of government which will also involve significant changes to taxation policies related
to investment. No doubt some prospective buyers and sellers
are delaying their housing decisions until after the election, however, there is no guarantee
that certainty will improve post-election considering the impact of a wind-back to negative
gearing and halving of the capital gains tax concession is largely unknown. It seems a reasonable assumption that removing
an incentive from the market wold result in some downward pressure on activity and prices
for a period of time.” As I’ve mentioned before, the Australian
Labor Party, if elected (which recent polling suggests that they will), have promised to
limit negative gearing from the start of 2020 to only include new housing, and halve the
capital gains tax discount to 25%. This will surely reduce prices even further. Mr Lawless was able to see the positive side,
however. He said: “The silver lining here is that housing
is now very affordable and first home buyers are proportionally much more active relative
to other areas of the country.” And that’s the March 2019 quarterly update
for Australian property prices. Although nobody can predict where prices will
go, one thing that we can guarantee is that investors can become skittish easily. If investors see that other investors are
pulling out of the property market, it just may result in a downward spiral of insurmountable
proportions. Personally, I wouldn’t be investing in property
in the current climate. Thanks for listening.

41 Comments

  • Merlin Geikie

    Yes, reality bites and bubble burst, and tears flow.
    Better to burst now than later.
    Euphoria is a vicious master.
    The fact that easy money, in the form of credit/debt, has changed the way people think, and they have gotten in over their heads.

  • Amadd

    For those wanting to buy, there doesn't seem to be much reason not to hold off from buying. There's a long winter ahead.

  • WRO

    "There were 8.2 million vacant homes in Japan in 2013" – news article. Sorry. Someone has to find it funny that there was Australian bidding wars and crowds of people going intent on buying the same home, while millions of homes elsewhere were free.

  • Anthony Jinks

    ā€œHousing is now very affordableā€… what planet is that idiot living on?!
    Oh thatā€™s right, heā€™s a property spruker! Which according to readers digest ranks him less trust worthy than a sex worker. Lol

  • Freddy

    Martin North (DFA) says Core Logic prices are based on Settlements which have an approximate two month lag. The "March Quarter" is really just the summer holiday period. TheĀ Core Logic index forĀ AprilĀ isĀ more interesting as it covers the supposed February turnaround in auction clearance rates.

  • Going Vegan

    Initially we will see a shortage of properties available in the market as home owners prolong listing their property in weak conditions. Only when wages suffer and mortgage stress begins, will we see a great buying opportunity as people start to "panic sell"

  • Damian

    I have to laugh when they say houses are now "very affordable". Depends on your definition of affordable I guess.

  • Tibor Z

    I I wouldn't be an Australian, I wouldn't be very happy to see prices falling. Cheaper means affordable and those who bough at the top? , sorry! Go for another – 50%! Fingers crossed it happens!

  • Brent Ewins

    The fact is that first home buyers are now going to wait maybe a year or two before jumping into "affordable housing" those who want to buy a larger home will be losing equity at the same rate as the drop in the market therefore struggle to meet targets or find anything suitable within the range or comfort levels they could have expected in years gone by. This whole system/ bubble must burst before any foundation will offer the foresight required to find a plan to start the ball rolling.

  • Yang Liu

    Somehow i have a feeling that the can kicking exercise will be initiated soon to at least try to put a floor to the dropping price.

  • Wing Kee Chan

    Why are house prices falling? Because they are running out of Hot Air!
    Look at this graph and tell me how much fall is needed before houses become Affordable:
    https://www.news.com.au/finance/economy/australian-economy/viral-graph-shows-house-price-danger/news-story/8ef84bdc2aaa5bb589aa77da5522d45b

  • Erdinc Yuksel

    Core logic is not getting the correct data as estate agents are not reporting all sales (and legally they dont have to). Actual and full sales figures will be available when sales are settled in 3-4 months time and available from the title office.

  • into music

    Prices will fall by 30% plus much care to all but I will say dumb ass,s Oz is more mind controlled than most nation seriously so dumbed down they will believe any narrative the news spits out or a sports star wants on about….

  • TDubya811

    I can predict the lowest house prices and the time the bottom of the market and catch a falling knife every time without fail. The trend analysis is really quite simple: hold off buying until the median price versus median household income trend looks exactly like Chewbacca in profile with a pigeon resting on the tip of his fingers facing towards him with his arm outstretched at 45Ā° below horizontal. Buy when the trend reaches the pigeons tail. Only then can you be sure that it is safe to get back into the housing market. It's the only way to be certain.

  • Brett Strickland

    3% 7% 20% WHO CARES!
    The property got over inflated in the first place now it's cooling off a bit, who gives a shit.

  • Mystical Angels

    Lol, geez people did u honestly think that prices were going to keep going up. What goes up must come down. Itā€™s basic science

  • Steve Steve

    Not easy to know where things are at… People have their angles. I was thinking of shorting housing… Kind of not sure now… Based on all the hype I thought housing was way overvalued… After looking at the numbers my thinking is different. The doom and gloomers compare average house prices and earnings ratios over time, but you have take into consideration different mortgage rates among other things. As long as you can service debt and all things equal no worries… I did a quick analysis comparing two time periods, Jan 2018 (high of property market) and June 2000 (just before the property boom and assuming this was some sort of norm). The results were interesting. Non-inflation adjusted numbers are as follows,

    January 2018:

    Median house price, $ 693,500 (source ABS Morgan Stanley research)
    Deposit required, 10 %
    Mortgage rate, 5.2% (source RBA)
    After tax median earnings, $ 45,400 (source ABS)
    30 year mortgage, total payments $ 1,233,819, $ 609,669 interest payed. $ 82 free cash per week

    June 2000:

    Median house price, $ 229,800 (source ABS Morgan Stanley research)
    Mortgage rate, 7.72% (source RBA)
    After tax median earnings, $ 24,000 (source ABS)
    30 year mortgage, total payments $ 531,863, $ 325,043 interest payed. $ 120.62 free cash per week

    Now people will compare these two time periods and not inflation adjust, even though the dollar depreciated by a factor of 1.6 approximately over time. So if we re-jig the June 2000 data in terms of 2018 $ values the 30 year mortgage data comes out as follows,

    June 2000:

    30 year mortgage, total payments $ 846,406, $ 517,273 interest payed. $ 192 free cash per week

    So a different picture gets painted. To get equivalent free weekly cash flow (so I suppose lifestyle is the same as 2000 levels), January 2018 median house prices would have to decline by about 14 % from the highs which they already nearly have. Now this all supposes that the data I used was accurate, the sources seem to indicate this. So where is all the doom and gloom??? As is mostly the case, the truth is somewhere in the middle. The doom and gloomers will say the debt level of Australia is super high, national and public. This could compromise the Australian dollar and cause interest rates to go up. Given the level of housing debt, small increases in interest rates have dramatic impacts. I repeat the above analysis for an armageddon situation as follows,

    Armageddon situation:

    Median house price, $ 1,000,000
    Deposit required, 10 %
    Mortgage rate, 8%
    After tax median earnings, $ 45,400
    30 year mortgage, total payments $ 2,377,397, $ 1,478,000 interest payed. – $ 651 cash deficit per week

    Now had housing median values rocketed to $ 1,000,000 in the next 5 years (possible the way it looked at the January 2018 highs) and mortgage rates hit the historical average of 8 % or so, called 'good night'… So the numbers are highly sensitive to interest rates with such large debt levels… Interestingly, with today's median housing prices (cooled about 14 % from January 2018 highs) at 8 % mortgage rate we get,

    Median house price, $ 597,250
    Deposit required, 10 %
    Mortgage rate, 8%
    After tax median earnings, $ 45,400
    30 year mortgage, total payments $ 1,419,900, $ 882,375 interest payed. – $ 37 cash deficit per week

    There is a dramatic improvement as compared to the armageddon situation. Good that median house prices have cooled, would have made it tough for next generation had we approached anything near armageddon… Seems like people running things know what they are doing after all in this country. I suppose all the past GFC business in America and other past financial calamities cause people to get a bit nervous sometimes as the situation on the ground can be difficult to determine given all the complexity, polarization and general hoo-ha going on.

    As, always the truth tends to be somewhere in the middle… The data given here in this analysis kind of gives everyone a leg to stand on, depends which way you look at it…

  • Reality Bites

    Are there any stats that measure the average iq of buyers? I don't understand why people are buying at the moment.

  • Michael Invests & tries to make Money

    If Labour gets rid of negative gearing and Capital gains tax concession the market is going to crash had 30-40% but than yields will rise lending will be loosend and you will find positive cashflow properties again. I cant wait to watch the crash thats were the big opportunites come.

  • Yiling Cao

    Australia has no future, people are poor and economics suck, no innovation, no big companies, just domestic farming biz… just need to work harder.

  • Mario Cendo

    Notice a lot of people wearing thongs instead of shoes. The working class poor, Part-time, Casual, Come back next week, Banks wont touch them, Banks close.

  • Rob Thompson

    AGENDA 21/30 IN FULL FORCE! ITā€™S ALMOST IMPOSSIBLE FOR A RICH MAN TO MAKE IT THROUGH THE GATES OF HEAVEN.

  • Steve Victor

    It took a lot of skill for these speculators to go to the property casino and put everything on black year after year. I mean, it landed on black for the last 18 years why wouldn't it continue!? Oh it landed on red… Bad luck.

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