House prices falling in 98% of Sydney and Melbourne suburbs

Via Herald Sun:

SYDNEY and Melbourne have been the powerhouse for Australia’s booming property market but a new report shows only 17 suburbs across the two cities are seeing increased prices.

With just a handful of suburbs among Sydney’s 700 showing steady rises in property values, experts say this continues to highlight a steady downward trend that’s been under way for three years.

Instead it’s the smaller capital cities that have previously underachieved that are emerging, most notably Adelaide and Perth.

Adelaide is now the nation’s leading market with 61 suburbs that have rising sales activity, while the recovering Perth market has 45.

Canberra is also travelling well, with a solid 20 suburbs showing an upward momentum relative to the city’s size.

Brisbane remains lukewarm and Hobart — currently the leading capital city on price growth — looks to have passed the peak of its up-cycle.

Darwin remains stuck in its downturn, with no signs yet of uplift.

That’s house prices falling in 98% of Sydney and Melbourne suburbs. Here’s what the “recovering” Perth and Adelaide markets looks like:

Both are falling. Adelaide in real terms and Perth still in nominal as well and steepening.

The truth is that from a top down point of view, there is no case to invest in Australian property today. Perhaps the odd localised market can buck the down trend but such widespread price falls are being driven by a credit crunch so it is generalised. It is especially concentrated for investors so those areas with the highest representation of such are worst hit, Sydney and Melbourne, but investors are the marginal price setters everywhere so it’s a headwind everywhere.

Moreover, it’s going to get worse. APRA is happy to allow the fringe banks and non-banks to take market share from the majors which are still ages away from delivering the loan leverage data needed to get approval for looser lending standards. Falling prices may well cause them to tighten standards further before we ever get there.

Then we have the interest-only reset and Labor’s now inevitable negative gearing reforms (and/or a Coalition election Hail Mary immigration cut).

Supply is gushing out and more is coming. Building approvals are still very high if falling. Chinese buyers are gone.

Plus the end of the cycle is approaching one way or another and another offshore shock is inevitable. Aussie bank funding costs are already rising in part on that basis. But it is also structural given the perception shift of Australian credit quality driven by the royal commission. Mortgage rates are at or past the cheapest that they will ever be right now.

The last round of price rises came from paying no interest on mortgages and selling our children to corrupt Chinese. That tells you that unless the Martians develop a taste for Aussie property, we’ve exhausted the pool of both credit and buyers.

David Llewellyn-Smith
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  1. The Horrible Scott Morrison MP

    Well you can use “numbers”, “data” and “graphs” to make any point you want. The fact remains that having a negatively geared investment portfolio sounds massively sexy, and there are millions of true Aussies waiting to jump in and keep prices nice and high.

    • proofreadersMEMBER

      And importantly, also throw in discounted capital gains tax and a standing invitation to reusa’s relo parties and what’s there not to love?

      • Capital gains tax discount is unfair in that it only applies if you make a capital gain.

        ScoMo should bring in a tax discount off regular income for investors who made a loss, to compensate them for having a go.

      • The Horrible Scott Morrison MP

        Thank you Dan. I’ll get the boys at the Treasury to model the outcome and then do whatever I want to based on my experience at the Property Council, so this will probably become policy.

      • Also ScoMo, opt-out model for stubborn young renters and savers not carrying much debt… sorry ‘credit’… where they are automatically allocated mortgages and need to opt-out should be considered to advance this brilliant economic model of property investing.

    • That tells you that unless the Martians develop a taste for Aussie property, we’ve exhausted the pool of both credit and buyers.

      Here comes that rainbow!

      • We’ll know we’re saved when we see Martians on 457 visas. And when they Uber driver us in their flying cars … lol.

      • “That tells you that unless the Martians develop a taste for Aussie property, we’ve exhausted the pool of both credit and buyers.”

        I hope so Gavin. That’s what I thought before they came up with the loans for SMSF fiasco. I doubt libs will allow sanity to prevail willingly, but it’s looking like financial mother nature is taking over.

      • Even Martians would be appalled by our choking, inflated housing costs and congested cities. The 457 visa scams have created an unskilled immigrant underbelly that is fostering US style perpetual poverty ghettoization. Martians can even recognize the immigration and housing mess.

      • Old mate Musk better get his interplanetary shuttle up and running quick to help us out, I guess.

  2. The market will eventually be purged of parasites and housing as shelter will be available to Australians of all persuasions.

    There will in my opinion, be a million sad investors who will go home to wherever leaving their financial mess behind for taxpayers to deal with.

    This may just be bad enough to get real changes for the good in laws to protect on immigration and foreign investment and so much more. There is a lot to be optimistic about as the ‘purge’ purges.

    • I don’t know, I am pessimistic as I saw ireland’s market tank and now they have the same problems all over again in parts of Dublin. Housing costs gone silly etc.. Australia is addicted to RE Speculation that any correction will last about 10 years before the mugs in charge decide to unleash the Animal spirits in housing and drive it up again to increase consumption until we have the next crisis.

      • The big diff is Euro v AUD and trade-ables attached to those currencies. How long will it take to get import replacement industries going here? With a 50 cent AUD it could take a generation and that will be very high unemployment and a serious voter block.

        I see a lower AUD as impacting aggregate cashflows and its cashflows real or fraudulent that the ponzi and 25% of the jerbs are built upon. Look forward to a legal ground zero to start afresh

      • So much easier to borrow, punt and declare MISSION ACCOMPLISHED than to build the basis of a sustainably functioning real economy.

  3. Had a relative over from the Gold Coast this week. It’s hard to believe relatively well-educated people can be so naive.
    “Last year we bought a 10-acre block near the new township of Coomera (?) and are trying to get it subdivided. But the Council is being difficult. We want to get it onto the market before everyone else who’s trying to subdivide out here”
    Asking if perhaps all ‘everyone else’ had the same issues and that if the council approved one, they had to approve all, and so swamp the market with huge new supply didn’t seem to have been considered!

    • Gold Coast is in la la land. I’ve been looking for a house there, but sellers have a sense of self entitlement which I never seen before. There seems to be some belief that GC follows Sydney by 24 months which therefore means they have another 12 months of rises. People start to believe these stupid statements when they are repeated ad nauseam. That market is headed for a very rude shock, similar to GFC period where they experienced 10% pa price falls in many suburbs. Currently sellers in that market believe a 100k per year of ownership is a fair and typical amount of profit for them to be looking at.

      • boomengineeringMEMBER

        Brothers house sold few days ago for less than than it was 13 yrs ago, Mandurah WA.

      • Yeah GC is weird. People think it’s Sydney but there aren’t enough high paid jobs to back the ridiculous prices. M1 is full in the morning with many working in Brisbane. The only way I can afford a house here is to sell my Sydney house with good deposit paid for with Sydney income, but to actually earn and save a deposit here to buy you would never afford it. Prices crashed here by 50+% after the gfc but recovered due the massive money thrown here during the commonwealth games. It is apparent that money is gone now.

      • Wasab, Gold Coast got absolutely smashed after the GFC. Most of their huge resi towers are still in the hands of receivers. Prior to that in the late eightees the Japs took it to new highs and then you know what happened next. It’s an “investment” destination for true believers (total dicknuckles). Nearest analogies; Miami, Dubai, Las Vegas.

      • Usual pattern with Games is construction spending brings forward economic activity and after the games there is a dip. Bigger in Sydney Olympics than Melb Comm games but we had mining boom in 06 not now. So GC will dip post games on this pattern.

      • As the old joke has it, What’s the difference between Gold Coast real estate and herpes? It’s easier to get rid of herpes.

    • Women? Haha, hardly see Indians or Chinese men with whities, unless they are pros. Nothing wrong with that

      • U can keep ur (entitled pro fem) whities, theres a reason why an increasing amount of divorced white males end up with ethnic women.

  4. How come MB is adamant the RBA won’t hike rates into a falling housing market but to the same extent is sure the ALP will do NG/CGT reform if it takes office in a falling market?

    For me it is a no on both.

      • Believing in Labor doing the right thing is a bit like believing the tooth fairy really visits you when you lose a tooth I suppose. It’s nice and comforting for a while. 🙂

    • The main reason is that raising rates would bankrupt a large percentage of the home buyers. I know one couple who jumped in, now can’t rent the house, and even with them both working they are on the edge. If they sold the two 150k SUV they might survive a bit longer, but they are in denial. This is not uncommon in my area I’m told.

      • Search for Porsche, audi, RR suvs etc. on carsales. There’s quite a few privates for sale around the 100k mark and they are 1yr or less old with 10k kms or so, at least 30k plus more when new. Why would you buy a car like that then sell it so soon at consideable loss unless you couldn’t afford it. Not to mention the seller comments, they really spruik the features like I can’t look it up myself. Maybe they are RE agents?

      • @dan121 agree makes no sense. They are probably panicking and the new car sakes are supposed to be tanking. Not that i can afford but we sometimes drop in for a look at a Port Melb luxury car place on our saturday ride and the prices are low.

      • I can’t afford it either nor do I want to look like a tosser. Just had a look out of curiosity the other week as I saw some at dealer lots while at the traffic lights and thought they were heavily discounted.

      • Agree Dan. I always wanted a 911. As a kid my dentist had one, but the tosser tag and being that guy driving alone in a depreciating asset turned me off.

      • Denial what are you talking about!
        I realize that after living so long in America geography may not be your strong suit, but even the least educated bogan knows that Da Nile is a river in Egypt, nothing to do with Australia…. the word has absolutely no place in any statement about Aussie RE.

      • @fisho … sweet and guilty as charged. i still really don’t know how to talk Oz again either. in the US I was asked what part of scotland I was from, and used to say southern scotland. i grew up just north of newcastle oz. my dad relo’s are from italy/english, and mother english/irish. i’ve always been confused :)) two big mistakes in life (from an oz pov) was listening to my mates AMP dad who ripped me off big time, and doing six years at uni when I could have just brought property… it’s a cruel rip off country we live in.

      • Only six years Uni, you got off easy…you must be one of those smart fellas.
        It took me a lot longer to learn what every other Aussie considers to be Innate Knowledge.
        Unfortunately in my family (family of origin issues (nb Not the same as State of Origin…go Blues)) real knowledge is defined by its uniqueness and differentiated value that it delivers to those that possess such “knowledge”…so you can only imagine how I struggle with this Aussie concept of Innate Knowing and the RE rivers of gold that flow to those that simply believe!
        Ah wasted times and I now find myself too old to correct for the stupidity that was schooled into me.

      • @fisho…don’t put yourself down as you’re probably much wiser than most who did uni. the smartest chip designer i ever meet didn’t do uni, and literally was self taught and ran rings around the phd’s. he retired at 45 which we thought was old at the time and set up a recording studio. he used to scare the crap out me in his m5. if you can learn efficiently without uni then why. my generation was spruked into uni and student debt…that’s not smart..i would have been much better off being a tradie. still i’m tankful i left oz and perused my career. it was scary at the time, but i’ve not looked back. though looking forward is even more scary given the world now, and more so for my daughter.

  5. “House prices falling in 98% of Sydney and Melbourne suburbs” – This is an utter lie!! ‘House prices (will) never go down in Australia’. Stop spreading lies! This is just a (statistical) noise or side-way movement! Stop making people panic, IT WILL NOT WORK. We are different in Australia!! Love it.

  6. FiftiesFibroShack

    Here are the 17.

    Melbourne metropolitan area:

    Ardeer, median price $620,000
    Dallas, median price $440,000
    Doveton, median price $500,000
    Knoxfield, median price $865,000
    Kurunjang, median price $380,000
    Macleod, median price $935,000
    Manor Lakes, median price $505,000
    Melton South, median price $390,000
    Mernda, median price $540,000
    Sorrento, median price $1.3 million
    Werribee, median price $480,000
    Wollert, median price $550,000

    Sydney metropolitan area:

    Beaumont Hills, median price $1.22 million
    Macquarie Fields, median price $660,000
    Rosemeadow, median price $600,000
    Spring Farm, median price $705,000
    Tahmoor, median price $630,000

    • Mac Fields!! Parents living their for over 45 years, not like they could give a sh1t. Probably due to demolishing the housos amd selling off the land, so couldn’t go much lower, well yes it can and will!

    • Yep FHB regions and a lot of ethnic regions. Dallas is where my partner is from (her parents still live there), absolute dive of an area but houses under $500k still and not too far from Melbourne CBD (big blocks). Just past Fawkner (another area I couldn’t live if you paid me).

    • Tahmoor is not in Sydney, or at least it wasn’t the last time I was there. It was all poultry farms and called itself The Turkey Capital of Australia.

    • From what I can tell of the Melbourne suburbs, most of them are less than desirable places (and I am being kind there) that desperate first home buyers and investors have swarmed on in the hope that prices will keep heading North at the rate that we have grown (until now) accustomed to.

      • Or places people have moved to after being priced out of more desirable locations such as Broadmeadows or Tarneit.

  7. This is not your average credit crunch. Interest rates are still thereabouts, and population ponzi demand is still cranked up to the max. Credit can still be found to buy in the sub $1m range.

    What we really need is one of those old-fashioned credit crunches. A panic which sends the 40% of offshore funding back offshore in a hurry, with the AUD on the canvas and interest rates to the moon.

  8. People have talked up how new FHB sweeteners from govt might bolster the market and stop it from falling. But if you look at nsw FHBs have rocketed due to the changes to the stamp duty rules, and yet prices are still down 6%. There will be a lot of FHBs sucked in on the way down, but don’t think for a minute that they’ll stop it falling.

  9. Highly motivated. Or highly desperate?

    “Our highly motivated vendor has instructed us to submit all offers, and is prepared to meet the market.”

      • Exactly! I keep seeing things where FIRE people openly acknowledge that they’ve been doing illegal shit, and they advertise that now they’re following the though that’s something special and worthy of commendation.. Anything from the RC for example.

  10. NEW ZEALAND … Don’t laugh … Deadbeat Dunedin of all places … out of land !!! …

    Dippie critical of Dunedin district plan … Otago Daily Times
    h/t GF

    A leading Otago developer has criticised Dunedin’s new district plan.

    Allan Dippie said yesterday a lack of greenfields sites meant it would be a struggle to generate the property development the city needed.

    Mr Dippie, who has developed residential subdivisions in areas including Wanaka and Mosgiel, said the city needed residential-zoned land for developers to build on. … read more via hyperlink above …
    Housing Minister Phil Twyford knows EXACTLY what the problems and solutions are …

    Reality check for Ministers (really some … just some … asleep enviros) at environment conference | Politik

    … extract …

    … Attendees probably left last night with more questions than when they arrived as Ministers, who in Opposition had seemed sympathetic to environmental issues were left qualifying and modifying their stance on major issues.

    This was starkly evident in an exchange between Urban Development Minister, Phil Twyford, and the EDS CEO, Gary Taylor over urban sprawl.

    Twyford had set out an impassioned description of the impact of high house prices in Auckland and advocated the linking together of transport and other infrastructure and new housing developments.

    But he also advocated the scrapping or urban-rural limits.

    “We believe that we have to manage growth on the fringes of the city,” he said.

    “If we do not allow new land to come into the supply we will never ever fix the problem of absurdly expensive urban land.

    “With good investment in infrastructure and transport, with more planning, not less to create the future urban environment that we want, setting aside areas of special value and open spaces, acquiring land for transport and other infrastructure, if we then allow the city to grow we will bring down urban land prices and it is absolutely critical that we do,” he said.

    Twyford had proposed this when he was in Opposition but, even so, any suggestion that more rural land was going to be absorbed for housing was going to be controversial at an environmental conference.

    And Taylor was quick to respond.

    “Everything makes sense except I worry about why you need to do away with rural-urban boundaries altogether,” said Taylor.

    He said that giving free reign to developers seemed inconsistent with Twyford’s overall objective of having a compact city.

    Twyford replied that it was a question of values.

    “This is for us, for Labour, for our coalition government, this is fundamentally a social justice issue.

    “Our objective is not to build a Copenhagen of the South Pacific.

    “We could build a beautiful city with a whole lot of the policies we have talked about.

    “We could build a Vancouver of the South Pacific; beautiful but utterly unaffordable.

    “I’m interested in us fixing this totally dysfunctional urban land economy.

    “If we don’t deal with affordability we will have completely wasted the opportunity that has been given to our generation.”

    Twyford said the only way to deal with the affordability issue was to deal with the land price issue and that meant dealing with the artificial scarcity of land caused by the planning system and the availability of finance for infrastructure.

    However he didn’t dispute that the Auckland region was going to become more heavily built up.

    “You know what,” he said. “In two or three generations this is going to become a tri-city conurbation between Hamilton, Tauranga and Auckland whether we like it or not.” … read more via hyperlink above …

    • … BUT … where is the ACTION ? …

      Govt criticised for moving slowly on Auckland (and other metros) growth boundary |
      … what lessons are being learned from Greater Christchurch ( with the GREATS being the adjoining smaller and therefore functional units of local government … Waimakariri and Selwyn … inlike the bureaucratic basket case of Christchurch) …

      Lincoln (South Christchurch): From mill town to boom town … John McCrone … The Press

      It was supposed to be a post-quake phenomenon, yet there is little sign of it slowing. Why are rural fringe towns like Lincoln still growing so fast? JOHN McCRONE reports.

      The contrast is striking. In central Christchurch, Fletcher Living is taking forever to get going on its East Frame townhouse and apartment block development.

      Government and council have agreed that denser inner city housing is vital to making a success of the earthquake rebuild. Yet despite inking a deal with Fletcher to build nearly 1000 homes back in 2015, the first 20 properties won’t be finished until late this year.

      The buyers just don’t seem to be there for them. And so the East Frame development has been uphill all the way.

      However, take the road half an hour out of town to Lincoln and the story is the opposite. This once sleepy village has exploded with subdivisions. Its residential footprint is now 10 times what it was 20 years ago.

      READ MORE:
      * Rolleston: Time to take it seriously
      * Christchurch’s $600 million motorways
      * Christchurch’s next problem: bringing residents back into the CBD
      * Government ‘locked in’ to contract for delay-riddled east frame

      • UNITED KINGDOM: Fears grow as house prices fall at fastest rate since financial crisis … Infosurhoy

        Fears are growing that Britain’s property bubble is about to burst.

        A string of indicators last night triggered concerns that the market is running out of steam – and could be heading for a correction or even a crash.

        Prices in London are falling at the fastest pace since the financial crisis – but the declines are not limited to the capital. … read more via hyperlink above …
        London house prices suffer largest drop in nine years … UK Telegraph (behind paywall)

        House prices in London fell 0.7pc in the 12 months to June – the largest annual fall in the city’s house prices since September 2009.

        Three of London’s central boroughs had double-digit drops in prices as the reversal in the capital’s fortunes continued. The City of London fell 23.8pc, Kensington and Chelsea dropped 13.9pc and the City of Westminster slid 12.1pc, according to data from the Office for National Statistics and the Land Registry. … read more via hyperlink above … (behind paywall) …
        Is Britain’s property bubble about to burst? Fears grow as house prices fall at the fastest rate since the financial crisis and sales tumble by 65 per cent … UK Daily Mail

        • Prices in London are falling at the fastest pace since the financial crisis

        • Declines not limited to the capital with houses losing value in various towns

        • Houses prices have enjoyed almost a decade of strong growth since the crash

        • Experts warned that prices have risen too far in parts of the country recently … read more via hyperlink above …