Residential property prices seem to be in free-fall.
The often-repeated industry lie - that home values always rise - is exposed by the latest data released today. The predicted soft landing seems to be turning into a crash landing.
Data from Australian Property Monitors shows the median sale price for Sydney homes (including both houses and units) fell almost 10% in December, while in Melbourne values dropped 7%.
APM’s Home Price Guide shows $64,000 was cut from the price of the typical Sydney home in December, compared with the previous month. And auction clearance rates were at their lowest levels in 12 years. The clearance rate in the northern beaches region of Sydney plunged to less than 30% leading up to the New Year.
The decline was most keenly felt with houses. In December the median house price dropped $84,000 - from $780,000 to $696,250, a fall of 11%. Apartment sellers also suffered with median sale prices falling from $510,000 to $452,000.
This carnage has been repeated around the nation. Median prices fell in all capital cities and Melbourne, Sydney and Perth all sold fewer than half of properties put to auction.
In Melbourne, the median home price was $340,000 in December, down from $367,000 in November.
The market decline is revealed in all kinds of statistics. Landlords in leading holiday towns throughout NSW had to slash holiday rentals by up to $1,300 a week to attract tenants in the recent festive season. Letting agents reported “bargain basement prices” in areas such as the Central Coast, Byron Bay and the Southern Highlands.
Major home builders say demand from home buyers halved in the latter part of 2003, forcing them to offer incentive packages. The nation’s largest home unit developer, Meriton, predicts a 30% default rate in the settlement of apartments bought off-the-plan.
The faltering real estate market has been created by a combination of telling factors: rising interest rates, over-supply of inner-city units, falling home affordability, new state laws in three states (NSW, Victoria and South Australia) which have nobbled auction rorts, strong action by federal authorities against real estate crooks, and action to close down get-rich-quick seminars.
One wonders how the real estate spinners will rationalise the latest damning figures. Before Christmas, the Real Estate Institute of NSW sought to disguise bad news in a media release on market movements. The press statement headed “Solid property performance during September Quarter” focussed on the 1% rise in the median price for Sydney houses.
Buried in the data was evidence of a slowing market and the impact of over-building. The median price for units across the Sydney market fell 1.3% - while inner-city unit prices dropped 5.3% in the quarter. Apartment values fell in 14 of Sydney’s municipalities.
This pre-dated the interest rate rise. The latest data from Home Price Guide shows that the decline in unit values has accelerated since then.
Similar frailty was found in statistics from the Real Estate Institute of Queensland. Median house prices fell in 29 Brisbane suburbs in the September Quarter. Another eight suburbs showed no increase in prices.
On the Gold Coast, median house prices fell or stagnated in 15 suburbs, including prestige markets such as Surfers Paradise, Mermaid Waters and Burleigh Heads.
Caution is needed when dealing with median prices, particularly over short time frames - such as comparing the September and June quarters.
But the figures disprove the industry myth that prices always rise remorselessly.
Home buyers and investors should remember that during the 1990s, following the last price boom, all capital cities had periods when prices fell, for both houses and units.
This is happening again. Real estate is not merely coming off the boil - it is entering a major freeze.
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