For Australia’s toughest market, Sydney, prices are down nearly 9% from its highest levels and even in Hobart, where values remain up at 5% from 2018, the market is on a downturn.
This change is attributed to stricter finance requirements, a drop in local and foreign investors, and a marked shift in sentiment.
Till at least mid-2018, values appear like they will remain on a downtrend in Sydney and Melbourne.
Although there are plenty of negative sentiments, the market is not in a pricing spiral as some analysts said.
Total listing volumes are increasing because it is taking longer for homes to sell, but new listings are declining.
Historically in the middle of a major slowdown in housing, listing volumes grow steeply with owners not having a choice but to sell, and currently this is being experienced in Australia.
In general, Australia’s economy is strong. Unemployment rate is down and business investment is growing. Though many workers are not receiving the wage hike they like and their spending habits are not like before, Australia is definitely not moving towards a financial crash.
In other price crash Australia suffered, like the subprime mortgage disaster in the US, thousands of people were becoming unemployed. However, that is not happening here.
Job loss is the real concern. If your friends and family are losing their jobs and you feel insecure about yours, then that it the time to be concerned about price declines.
In many parts of Australia, jobs and population growth are up. However not like in Perth and Darwin where values have been declining due to an economic slowdown, Sydney and Melbourne are both experiencing solid employment conditions.
There are other statistics that are worth noting beside the good employment figures: the low office vacancy rates, and the strong rental demand.
This slowdown is attributed to finance and is self-inflicted, meaning there is no global financial crisis where we cannot do anything about the situation.
A big concern right now is the sentiment in the property market. Price declines are affecting sentiment, which is worrying the Reserve Bank of Australia – not specifically due to the effect on wealth, but the worry it causes people.
Self-assured consumers reflect positively on the economy since they purchase and invest more. If they lack confidence, the deficiency in spending impedes economic growth. At the moment, as the RBA said, a wage increase is very much needed by all.
There have been further declines in Sydney and Melbourne until now. Since the federal election buyer confidence is slowly returning and it is expected that we may in fact be at the bottom of the market now rather than the beginning of 2020 as predicted.
So it seems the market is not as bad as first thought and that it is recovering faster than analysts forecasted.