House prices are falling – which ASX shares are in the firing line?

Australian house prices continued to drift lower in July, falling 0.6%. We take a look at the ASX shares in the firing line as a result.

| More on:
falling bar graph representing house prices and asx share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Australian house prices continued to drift lower in July, falling 0.6%. This is the third straight month of declines and follows a 0.7% fall in June. Melbourne and Sydney led the falls in July, dropping 1.2% and 0.9% respectively. Which ASX shares are likely to be impacted by falling Australian house prices?

ASX shares impacted by house prices

The housing market has been insulated from a more significant downturn by low interest rates, government support, and repayment holidays for distressed borrowers. But the market faces another challenge as Victoria heads into six weeks of hard lockdown. Some have predicted house prices could fall by up to 20% in the state as government stimulus dries up in October and loan repayment holidays end.

Falling house prices can impact ASX shares, as seen during the global financial crisis (GFC). Whilst some query the direct relationship between ASX shares and house prices, I believe two ASX shares, in particular, have their fortunes tied to the real estate market. REA Group Limited (ASX: REA) and Domain Holdings Australia Ltd (ASX: DHG) both run online real estate platforms which will see a slow down in listings as a result of Victoria's latest restrictions. 

Impacts of the pandemic

The Australian property market was showing strong signs of improvement prior to the onset of the pandemic. This included improvements in national residential listings led by Melbourne and Sydney. According to REA Group, national listings were up 3% in mid March but fell 2% over the full month as the impact of the pandemic took hold. REA Group CEO, Owen Wilson, commented, "prior to the impact of COVID-19, the market recovery was in full flight." 

The real estate market continues to be negatively impacted by the pandemic and surrounding economic uncertainty. Weakness in new listings is expected to impact revenue with REA Group reporting national listings down 33% in April. The impact of this fall will be revealed in the company's full year results which are set to be released on Friday. Domain is due to report its full year results on 20 August but has revealed new listing volumes had declined in the high 20% range in April. Like REA Group, Domain has moved to support its customers during the pandemic with discounts and product initiatives. 

Foolish takeaway 

REA Group and Domain will be two ASX shares hoping Victoria's latest lockdown doesn't slam the breaks on house prices nationally. With both ASX shares due to report results this month, the financial impact of the pandemic thus far will become clearer. 

Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA 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.

More on Share Market News

sad party goer sitting alone after celebration
Share Market News

Here are the top 10 ASX 200 shares today

The ASX 200 had a horrible end to its trading week this Friday.

Read more »

A young female investor sits in her home office looking at her ipad and smiling as she sees the QBE share price rising
Broker Notes

3 ASX shares brokers tip for significant outperformance in FY 2025

Leading brokers expect some significant outperformance from these three ASX shares.

Read more »

A woman looks quizzical while looking at a dollar sign in the air.
Technology Shares

Are DroneShield shares still fundamentally expensive now?

DroneShield shares still look expensive, but the growth is there...

Read more »

a business man in a suit holds his hand over his eyes as he bows his head in a defeated post suggesting regret and remorse.
Share Fallers

Why Aurelia Metals, Australian Ethical, Lifestyle Communities, and Regis Resources shares are falling

These shares are falling heavily with the market. But why?

Read more »

A young man talks tech on his phone while looking at a laptop. A financial graph is superimposed across the image.
Technology Shares

Should we be worried about a Nasdaq stock market crash?

The tech sell-off has seen the Nasdaq plunge 3.4% in two days. Now what?

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Adore Beauty, Domino's, DroneShield, and Universal Store shares are rising today

Not all shares are falling today. Why are these rising?

Read more »

Man smiling at a laptop because of a rising share price.
Dividend Investing

One ASX dividend machine I'd buy over Fortescue shares right now

When it comes to dividends, growth can be better than a high yield.

Read more »

Broker looking at the share price on her laptop with green and red points in the background.
Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »