Australian housing slump set to be 'worst in a generation'

Australia’s current housing market slump is on track to become the worst in a generation, with price falls in Sydney and Melbourne set to eclipse those recorded during the global financial crisis and 1989-91 recession.

CoreLogic’s hedonic home value index released today showed the pace of price declines in Melbourne and Sydney accelerated over November.

This resulted in the weakest month of national price movements since the early days of the GFC in December 2008.

CoreLogic head of research Tim Lawless said more price falls could be expected and both of Australia’s two largest cities were on track to break 30-year records for largest price declines.

Sydney’s median price has already fallen 9.5 per cent since the start of the current downturn in July last year.

Melbourne values have fallen 5.8 per cent over the duration of its market downturn, also just shy of the record price fall recorded during the 1989 recession.

Mr Lawless said the weakness in Sydney and Melbourne dragged the national market down.

“The downwards pressure on national dwelling values is largely confined to Sydney and Melbourne,” he said. “Conditions across the (rest of the) Australian housing market are increasingly diverse.”

Brisbane and Adelaide prices have remained largely unchanged over the past year, while Hobart and Canberra price are continuing to grow. Prices in Perth fell.

Weakness in Sydney and Melbourne at a time when some other capitals were showing price growth was largely the result of restrictive lending practices, particularly for investors, Mr Lawless said.

“Housing affordability constraints are more pronounced in these markets and rental yields are substantially lower, indicating an imbalance between rental values and dwelling values,” he said.

“Sydney and Melbourne have also been more affected by the reduction in foreign buying activity.”

CoreLogic’s hedonic home value index showed Hobart was the leading city for price growth, with the median price growing 9.3 per cent over the year to November.

Adelaide’s median grew 1.4 per cent for the year, while the Brisbane median grew 0.3 per cent.

The Canberra median price grew 4 per cent for the year.

Sydney recorded the biggest falls over the year to November, with the median dropping 8.1 per cent.

The Melbourne median fell 5.8 per cent. Perth’s median dropped 4.2 per cent annually.