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Aussie home prices plunge into new year, decline gathers pace
AUSTRALIAN home prices started the new year with another sharp fall as credit conditions tightened further and investors went on a buying strike, clouding the outlook for consumer confidence and consumption.
The relentless slide is a concern for the Reserve Bank of Australia which holds its first policy meeting of the year next week amid growing speculation it might have to cut interest rates to stem the rout.
It is also a headache for the Liberal National government of Prime Minister Scott Morrison, which faces a general election in May and is trailing badly in opinion polls.
Friday's report from property consultant CoreLogic showed home prices nationally fell 1 per cent in January from December, down 5.6 per cent on a year earlier. The index has fallen in 13 of the past 15 months, wiping out more than two years of gains. Values in the combined capital cities fell 1.2 per cent in January and 6.9 per cent for the year.
Losses were again led by Sydney, which fell 1.3 per cent, and Melbourne, with a drop of 1.6 per cent. The pace of decline has actually accelerated over the past three months with Sydney losing 4.5 per cent and Melbourne 4 per cent.
Sydney dwelling values are now back to levels last seen in mid-2016, while prices in Melbourne have returned to where they were in January 2017. "January can be a difficult month to read the housing market due to low levels of activity, however the recent trend in data has generally weakened over the past three months," said Tim Lawless, head of research at CoreLogic.
"Tight credit conditions, weakening consumer sentiment, less domestic and foreign investment and higher levels of housing supply are the primary drivers of the worsening conditions," he said.
The scale of price falls is also a drag on consumer wealth given Australia's housing stock is valued at a cool A$6.8 trillion (S$6.65 trillion), or almost four times the country's annual gross domestic product.
The reversal in prices after a decade of gains has led the country's prudential regulator to ease some of its lending restrictions on banks, but credit is still tight.
Scalded by a spate of scandals, banks have gone further by toughening their own lending criteria. REUTERS