Australian Property Downfall March 2019 Quarterly Update

Australian Property Downfall March 2019 Quarterly Update


Today may be April 1st, but the current downturn
in Australian property prices is no laughing matter. Data from CoreLogic has been released today
showing the fall in prices over the March 2019 quarter. Sydney is down 3.2%; Melbourne down 3.4%;
Brisbane 1.1%; Adelaide 0.5%; Perth 2.9%; Darwin had the highest percentage falls at
3.9%; where Canberra (0%) and Hobart (1.2%) were the only capitals not to fall over the
quarter. That’s a national fall of 2.3%, or 2.7%
if you just include the capital cities. Over the month of March, there was 0.6% fall
in property prices across the nation. Tim Lawless, Head of Research at CoreLogic,
stated: “Although the CoreLogic national hedonic
index series trended lower in March, the actual rate of decline has been easing over the past
three months. The 0.6% drop in March was actually the smallest
of the month-on-month declines since values fell by 0.5% in October last year.” However, the international investment banking
company, Morgan Stanley, have said that March is typically the seasonally strongest month
for Australian house prices throughout the year. The recent slowdown in house price drops is
likely due to seasonality, rather than the prospect that prices may soon bottom. They stated: “Price declines in February were less than
the average decline over the past few months, but still faster than the average seen over
the rest of 2018. This improvement is in line with the usual
seasonal trends in house prices, with December and January typically significantly weaker.” In other words, there may be a long way to
go yet. CoreLogic’s Mr Lawless said: “While the pace of falls has slowed in March,
the scope of the downturn has become more geographically widespread.” He also talked of the impact of the upcoming
federal election on property prices. He said: “Federal elections generally cause some
uncertainty, which is amplified more so on this occasion considering the potential for
a change of government which will also involve significant changes to taxation policies related
to investment. No doubt some prospective buyers and sellers
are delaying their housing decisions until after the election, however, there is no guarantee
that certainty will improve post-election considering the impact of a wind-back to negative
gearing and halving of the capital gains tax concession is largely unknown. It seems a reasonable assumption that removing
an incentive from the market wold result in some downward pressure on activity and prices
for a period of time.” As I’ve mentioned before, the Australian
Labor Party, if elected (which recent polling suggests that they will), have promised to
limit negative gearing from the start of 2020 to only include new housing, and halve the
capital gains tax discount to 25%. This will surely reduce prices even further. Mr Lawless was able to see the positive side,
however. He said: “The silver lining here is that housing
is now very affordable and first home buyers are proportionally much more active relative
to other areas of the country.” And that’s the March 2019 quarterly update
for Australian property prices. Although nobody can predict where prices will
go, one thing that we can guarantee is that investors can become skittish easily. If investors see that other investors are
pulling out of the property market, it just may result in a downward spiral of insurmountable
proportions. Personally, I wouldn’t be investing in property
in the current climate. Thanks for listening.