After six years of strong house price rises, Australia’s housing market is now cooling sharply. This is mainly two to the introduction of market-cooling measures, including strictering restrictions and the imposition of higher taxes on foreign investment in the housing market.
House rates in the country of eight major cities fell by 7.7% during the year to Q1 2019 (-8.92% inflation-adjusted), in sharp contrast with the yoy rise of 2.2% a year earlier, based on figures from the Australian Bureau of Statistics (ABS). It was the fourth consecutive quarter of y-o-y house price decline and the biggest drop since data became available in Q1 2002.
Quarter-on-quarter, house prices fell by 3.07% (-3.07% inflation-adjusted) in Q1 2019.
However, the national figures conceal regional house price variations. Sydney saw the biggest decline, with the established house price index falling by 11% (-12.2% inflation-adjusted) during the year to Q1 2019, followed by Melbourne (-10.5%). Moderate to minimal house price falls were recorded in Darwin (-2.6%), Perth (-2.5%), Brisbane (-0.9%) and Canberra (-0.5%). On the other hand, house prices continued to rise modestly in Hobart (3.8%) and Adelaide (0.6%) during the year to Q1 2019.
The mean price of residential dwellings in Australia was AU$636,900 (US$433,700) in Q1 2019, down by 7.4% from the same period last year.
Both the demand and supply of homes are now falling. Purchases of new dwellings plummeted by 28.3% y-o-y during the first five months of 2019, according to ABS, and purchases of established dwellings fell by 13.9%.
In the secondary market, established dwelling purchases fell by 13.9% in January to May 2019 compared to last year, or a decline of 16.3% by value.
Acquisition of residential real estate by foreign nationals and corporations is subject to FIRB approval. Foreigners are not allowed to buy an established (previously occupied) house. They may buy an unoccupied new dwelling, but only if the FIRB feels that the purchase will not add to the shortage of properties available to native Australians.
Outlook: house prices to fall further.