Sydney property values plunge 13% with worse to come

By Leith van Onselen

CoreLogic’s daily house price index for 24 February, released yesterday, revealed that Sydney dwelling value losses have hit 13%:

As shown above, Sydney’s current downturn is the second worst in nearly 40 years of data.

Quarterly value declines continue at a swift pace, running at 4.3%:

Whereas annual losses are running at 10.3%:

The immediate outlook for Sydney property is obviously very poor given the collapse in investor finance commitments, which shows a strong correlation with price growth, not to mention weak auction clearances:

Moreover, according to Domain data, Sydney housing is experiencing the highest discounts in a decade:

Across the city, the average discount on initial prices is 8.2 per cent, or $87,134, for houses and 8 per cent, or $56,160, for apartments.

House sellers have not discounted at this level since January 2009, while apartments have not had discounts like this since 2006.

Sydney’s median house price fell 9.9 per cent last year and the average time to sell climbed to more than 70 days. Domain senior research analyst Nicola Powell said vendors were struggling to adjust price expectations quickly enough…

Citywide, the level of discounting has increased 50 per cent year-on-year…

“We’ve got people knocking back the first offer they get and then selling for hundreds of thousands of dollars less three or six months later,” said Tim Fraser of Di Jones Real Estate North Shore.

Whereas buyers’ agents have blamed spruiking realtors for the heavy discounts:

Buyers’ agents, who represent property buyers, are blaming the reductions on the “irresponsible” and unrealistically high prices set by realtors desperate to win business from sellers.

“These price cuts are a result of bad agency practice,” said David Morrell, director of buyers’ agency Morrell Koren. “Professionals should set realistic values that reflect where the market sits.”

Mr Morrell said such over-valuations were widespread and were partly driven by real estate agents trying to generate more revenue through advertising campaigns paid for by the vendor…

We can’t see Sydney’s market turning around any time soon, given: mortgage credit is likely to remain tight; the epic interest-only mortgage reset; the flood of high-rise apartments hitting the market alongside concerns around build quality; the ongoing softening in Chinese demand; and finally Labor’s negative gearing and capital gains tax policy.

While the current rapid pace of decline probably won’t be sustained, there is a good chance that Sydney’s dwelling values will be facing 20% losses by year’s end.

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