Aussie house prices fall most since global financial crisis

CoreLogic

Nationwide home values fell 0.7% last month, led by a 1.4% drop in Sydney and 1% in Melbourne, according to CoreLogic Inc data released yesterday.

The two cities account for 55 per cent of the national market.

Sydney prices dropped 1.4 per cent in November, bringing the city's total peak-to-trough decline to 9.5 per cent - nearly on par with the previous record fall of 9.6 per cent between 1989 and 1991, when interest rates were in the high teens, unemployment was rising towards double digits and Australia was entering recession.

Sydney values fell 9.6 per cent between 1989 and 1991.

The tightening in finance conditions has been more pronounced across the investor segment of the market, where Sydney and Melbourne have recorded much higher concentrations of investment demand.

"That's really reflective of the fact that there has been a lot of new supply coming onto rental markets", he said.

"Strong growth in these areas is starting to erode the affordability advantages of these markets, although lifestyle factors are also a strong driver of demand in many of these locations", Mr Lawless said.

"Typically, the catalyst for a turn in the housing market is a result in changes in interest rates or economic conditions", he said.

"Dwelling values are trending higher across five of the eight capital cities, albeit at a relatively slow pace compared with the previous surge in Sydney and Melbourne".

Sydney saw the steepest fall in prices with a 1.4% drop, bringing the cities overall decline to 9.5% over the past financial year.

But the situation is deteriorating even more quickly in the key Sydney and Melbourne markets.

However, in the absence of an unexpected sharp slowdown in the economy, leading to the potential for weaker employment growth, higher unemployment and potential softening in migration levels, or a spike in mortgage rates, Mr Lawless said the current economic backdrop should act to support home prices in the period ahead.

In contrast, Australian interest rates are at record lows, unemployment is now about 5 per cent and economic growth is around, or even slightly above, average at 3.4 per cent over the year to June 30.

However, unit values are now falling across more centres.

While values across Tasmania surged by their most for a year, the mainland price slide continued apace.

This story first appeared in Business Insider.

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