In the last week, Hobart was the only capital city that saw a price gain, at a modest 0.8 per cent.
There were slight price falls in Brisbane of 0.3 per cent and Canberra of 0.2 per cent. Adelaide remained flat.
The east coast continues to carry the lion’s share of price dives. Sydney dwelling prices fell another 1 per cent, taking them about 13 per cent down from their high of July 2017. Melbourne prices fell another 1 per cent, bringing them 9.6 per cent down from their November 2017 high. This is Sydney’s worst fall since the 1980s recession, and Melbourne’s worst since the 1990s.
In Western Australia, Perth prices fell another 1.5 per cent and are now down 17.8 per cent from their 2014 high.
Darwin prices fell another 1.7 per cent and are now down 27 per cent from their 2014 high.
“Overall, Sydney and Melbourne are likely to see a top to bottom fall of around 25 per cent spread out to 2020 with another 15 per cent or so to go given falls already seen, but for national average prices, the top to bottom fall is likely to be around 10 to 15 per cent,” said AMP Capital chief economist Shane Oliver.
“A crash landing – say a national average price fall in excess of 20 per cent – remains unlikely in the absence of much higher interest rates or unemployment, but it’s a significant risk given the difficulty in gauging the impact of credit tightening and how investors will respond as their capital growth expectations collapse at a time when net rental yields are around 1-2 per cent,” he said.
What about interest rates?
After two years of record lows, the nation’s top economists are seeing an interest rates move on the horizon, Mr Oliver included.
“Ongoing home price falls in Sydney and Melbourne will depress consumer spending as the wealth effect goes in reverse, and so home owners will be less inclined to allow their savings rate to decline further. It’s also a negative for banks and is consistent with our view that the RBA will cut the cash rate to 1 per cent by year end, starting around August,” Mr Oliver said.
“Price weakness has now gone beyond levels where the RBA started cutting rates in 2008 and 2011, and the 2015-16 property slowdown was also turned around by rate cuts in May and August 2016,” he said.