It seems there’s no light at the tunnel for Australian house prices with The Australian newspaper this morning reporting some more negative house price data for the month of November revealed by property analytics business CoreLogic.
According to the data revealed in the newspaper Sydney just recorded its worst monthly fall in house prices in 14 years, with prices down 1.3% in the city over November. On an annualised basis that would mean falls of another 15.6% in the year ahead unless the city reverses the slump.
In total CoreLogic has Sydney prices as now down 9% from their July 2017 peak, with most other data providers estimates likely to now be in the high-single-digits as well.
CoreLogic is now also tipping Sydney’s house prices to fall 15% from their 2017 peaks.
Melbourne and Perth also saw prices in November fall 0.9% and o.6% respectively, while Brisbane grew 0.1%, with Adelaide flat.
The flat or falling house prices are being blamed on a number of factors including a ‘credit crunch’ that is seeing major lenders such as the Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) lend less to owner occupiers and investors.
This is for a number of reasons including regulatory restrictions in the case of investors and tighter checks on an applicant’s income and expenses in the case of owner occupiers.
Logically, the less a property buyer can borrow, the less they can afford to bid for a property.
Other factors being blamed are affordability (in the case of Melbourne and Sydney), weak wages growth, and the lack of foreign buyers in states like NSW since the state government imposed significantly higher 8% surcharge taxes on overseas investors.
Rents are also falling in Sydney for example, which means the smarter or more professional investors will be adjusting down their assessed values of properties.
If house price falls continue through 2019 in Sydney and Melbourne the damaging effect on confidence and consumer spending could flow through to discretionary retail stocks.
Already shares in the likes of Super Retail Group Ltd (ASX: SUL) have tumbled in the past year. While the chairman of star retailer Premier Investments Limited (ASX: PMV) told investors he has been closing apparel stores on major urban shopping thoroughfares as landlords were no longer realistic about rents given the worsening retail environment.
However, it’s big bank investors who should keep the closest eye on any signs of a crash in the property market in 2019 as this could take banks’ share prices down with it.
Motley Fool contributor Yulia Mosaleva owns shares of Commonwealth Bank of Australia. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool Australia owns shares of Super Retail Group 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.