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Australia has seen a decline in property prices over the past year, so have things steadied?

Why have Aussie house prices dropped?

And, why has Australia seen a decline in prices over the past year?

Well CoreLogic’s head of research, Tim Lawless, told the ABC many factors had contributed to the downturn:

‘Foremost of which is the tighter credit environment which has slowed market activity, especially amongst investors…

‘Fewer active buyers has led to higher inventory levels and reduced competition in the market.

‘Collectively, these factors have been compounded by affordability challenges, reduced foreign investment and a rise in housing supply.’

Another factor showing that prices are on the decline is the fact that sellers are now spending longer in the market.

In CoreLogic’s report, Lawless wrote:

‘Advertised stock levels are already 7.6 per cent higher than the same time last year across the combined capitals, despite a 5.7 per cent reduction in ‘fresh’ stock being added to the market…

‘The rise in inventory is simply due to a lack of absorption; with fewer buyers, homes are taking longer to sell.’

And tighter lending standards are likely to have an increasing impact, especially in the top end of the market:

‘In the higher value cities like Sydney and Melbourne we’re seeing typical dwelling prices remain more than 8 times higher than median household incomes, suggesting tighter credit conditions for borrowers with a high debt-to-income ratio will likely impact on demand more in these cities over others.’

So, if we look further into 2018, what are the prospects for those looking to buy and sell?

Spring is usually the busiest time of the year in the housing market. And coming into the spring quarter, Lawless believes that ‘…vendors will need to be realistic about their pricing expectations’.

Furthermore, the pending federal election and increases to mortgage rates could also see house prices further affected.

With housing markets threatened by high household debts, Lawless doesn’t see conditions working out in vendors’ favour:

‘With household debt at record highs, borrowers are likely to be sensitive to small movements in the cost of debt and this upwards shift in mortgage rates is a negative for housing market conditions.’

CoreLogic’s head of Australian research, Cameron Kusher, also believes that sellers need to change their expectations.

Many selling believe we’re still at the height of the housing bubble, but as we’ve seen in 2018, markets are weakening, which may suggest the bubble could be on the verge of bursting.

‘For sellers, they really need to be very realistic about the market … and set appropriate prices for the market, which means not prices that they would’ve set 12-18 months ago.’

Kusher also had this to say:

‘For potential buyers, you don’t really need to be in a hurry in this market, there’s lots to choose from, there’s not as much competition out there in the market.

‘Be aware that the cost of housing is falling, so if you hold off you might be able to get that property or a similar property at a lower price point a little bit further down the track.’

Australia has been in a housing bubble for a number of decades. But the past decade has seen Australian house prices sky rocket.

         Now, we may finally be seeing the end of the bubble.

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