Oz property prices fall for sixth month in a row
The residential property market in Australia stood out like a safe beacon as those in the rest of the world slumped but now the real estate industry is suffering a slide.
Property prices in state capitals have fallen for the sixth straight month in a row amid warnings rising interest rates could accelerate the slide further and financial market volatility could also affect prices.
Nationally values fell 0.2% in June, according to the latest RP Data-Rismark Hedonic Home Value Index. This follows a fall of 0.3% in May, 0.4% in April and 0.5% in March.
House prices in Australia are considered to be too high, having risen sharply over recent decades amid easy credit conditions. Global investors are keeping a close eye on what many perceive is the Achilles heel of the economy.
‘We think the Reserve Bank of Australia is likely to raise rates at least once or twice more to address Australia's burgeoning inflation problem, which means dwelling values will probably soften a bit further. This should open up attractive investment opportunities,’ said Chris Joye, an economist at Rismark.
However, price moves continue to be mixed across the country. Brisbane and Perth have seen values have drop by 6.3% and 4.7% respectively over the last year, while Sydney is up 0.5%.
Another survey shows that new home sales fell in June, suffering their largest monthly decline in five years. The number of new homes sold in June dropped 8.7%, seasonally adjusted, according to the Housing Institute of Australia JELD-WEN New Home Sales Report.
HIA chief economist Harley Dale said the housing sector was getting weaker even though the central bank had kept the cash rate on hold at 4.75% since November 2010. He said speculation in recent months that there would be an interest rate rise had not helped new home sales.
‘There has been widespread anecdotal evidence for some time that new home demand hit a wall in the middle of 2011 and these new home sales figures, unfortunately, confirm that situation,’ Dale explained.
Sales of detached homes fell for a second consecutive month, down 8.8% in June, HIA said, while multi-unit sales fell 8.1% after they rose by 23.3% in May.
In June, detached new house sales fell 1.8% in New South Wales, 10% in Victoria, 17.1% in Queensland and 6.3% in Western Australia. Sales were flat in South Australia.
Meanwhile, there are concerns that share market turmoil could trigger further softening in Australia's property market.
‘In the past, when share markets have really fallen away, there has usually been a good reason for that such as a wider economic slowdown occurring, and in that context, you usually get rate cuts,’ said Jason Anderson, manager of economics in NSW for property researcher MacroPlan Australia.
However, Mr Anderson added his view was rates would remain on hold for the remainder of the year and the housing market would track sideways.
But should the economic uncertainty prompt the Reserve Bank of Australia to lower the official cash rate from 4.75%, it may usher back first home buyers, a move which could offer support to the more affordable segment of the market.