House prices falls are accelerating in Sydney and Melbourne

Property data business CoreLogic is reporting that national house prices are now nearly 2% below their September 2017 peak, with prices falling for 10 consecutive months.

Melbourne’s prices are now down 1.9% for the quarter ending July 2018 and lost 0.9% in value over just the past month.

While Sydney’s median dwelling value is now down 5.4% over the past year, with a 0.6% decline over July.

On the other side of the ledger are the more affordable cities of Brisbane and Adelaide that posted gains of 1.2% and 0.7% over the year, with Hobart confirming it’s place as Australia’s hottest property market with 11.5% annual gains.

The low-to-mid-single digit falls in the housing market over the past year need to be placed in the context of the property boom of 2012-2017 across Melbourne and Sydney, where prices gained up to 70% in some areas.

However, it’s stating the obvious to note that if prices are falling when Australian benchmark lending rates are at a record low 1.5% then they could come under much more pressure as lending rates eventually climb.

Policymakers have several tools at their disposal to support prices including easing back on restricitions on investor credit growth and overseas buyers, but the case for capital growth for property over the years ahead looks moderate at best.

Some prophesisers of doom claim that prices in Sydney and Melbourne need to fall another 20% before they start trading in line with historical price-to-income ratio norms, although this is an unlikely scenario if it were to happen it would likely tip the Australian economy into recession.

Many Australians will own the big bank shares like National Australia Bank Ltd (ASX: NAB) or Commonwealth Bank of Australia (ASX: CBA) and home loan lending remains their core profit-making business. As such falling property prices and confidence are a negative for the banks that are already stuggling for top-line growth. As such the banks then may be ok for dividends in the years ahead, but investors shouldn’t expect much in the way of capital growth.

The Disruptors: 3 Revolutionary Aussie Companies to Back for 2018

We’re living in one of the most exciting times in investing history. Innovation and a booming culture of entrepreneurship are constantly creating new companies with the potential to make forward-thinking investors very rich. Now more than ever, one small, smart investment could make a huge difference to your wealth.

That’s why at The Motley Fool we’ve been scrutinizing the ASX to uncover the kinds of companies that we believe could turn into the next Atlassian.

We’ve found three exciting companies that we believe re poised to perform in the new year. Click here to uncover these ideas!

Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

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.

5 ASX Stocks for Building Wealth After 50

I just read that Warren Buffett, the world’s best investor, made over 99% of his massive fortune after his 50th birthday.

It just goes to show you… it’s never too late to start securing your financial future.

And Motley Fool Chief Investment Advisor Scott Phillips just released a brand-new report that reveals five of our favourite ASX stocks for building wealth after 50.

– Each company boasts strong growth prospects over the next 3 to 5 years…

– Most importantly each pays a generous dividend, fully franked.

Simply click here to find out how you can claim your FREE copy of “5 ASX Stocks for Building Wealth After 50.”

See the stocks now