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Australian house prices are officially heading lower

This morning one of Australia’s most closely followed house price data compilers in CoreLogic reported that “Australian dwelling values fell for their ninth consecutive month in June,” although by miniscule amounts with prices nationally only “1.3% below their September 2017 peak.”

Amongst the capital cities, Hobart remains the star performer delivering 12.7% annual price growth, with Canberra at 2.3%, while Melbourne, Brisbane and Adelaide all posted annual price growth between 1% to 1.1%.

According to CoreLogic, Sydney’s home prices fell 0.9% over the quarter to June and are down 4.5% over the year, although it remains a mixed market with significant price falls or modest gains depending on which parts of the Harbour City you focus on. The mid-single-digit falls also need to be placed in the context of a 5-year property bull run from 2012-2017 that saw average prices gain around 70% in much of the city.

Now though CoreLogic is reporting that the more expensive end of the Sydney market is dragging the rest lower with “upper quartile” property prices dropping 7.3% over the past 12 months.

For home owners and investors the question is whether Australian property prices have run out of gas given lending rates are already at record lows and unlikely to head lower unless the wider economy hits tough times that themselves would be a negative for house prices.

As such September 2017 might be the high watermark for Australian property prices in some capital cities for the next couple of years or longer if the Reserve Bank eventually embarks on a rate hike cycle that will pressure the borrowing capacity of buyers across the country.

For share market investors the key takeaway is that flat or falling property prices are a net negative for major lenders like Westpac Banking Corp (ASX: WBC) or National Australian Bank Ltd (ASX: NAB), while discretionary retail stocks may also feel the heat as consumers feel less wealthy and more indebted as property price growth stalls.

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The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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