Credit crunch continues to spur home price slump

CoreLogic’s latest Hedonic Home Value Index has revealed that national home prices dropped by 0.3 of a percentage point in August, with prices falling by 1.1 per cent over the past quarter and 2.0 per cent year-on-year.

According to CoreLogic’s head of research, Tim Lawless, the continued softening in home prices has been driven by tighter lending conditions, which have reduced demand for credit, particularly from investors.

“Weaker housing market conditions can be tied back to a variety of factors, foremost of which is the tighter credit environment which has slowed market activity, especially among investors,” Mr Lawless said.

“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.”

Combined capital city dwelling values also declined, dropping by 0.4 of a percentage point in August, 1.2 per cent over the quarter and 2.9 per cent year-on-year.

Melbourne and Perth reported the sharpest price declines (0.6 of a percentage point), followed by Sydney (0.3 of a percentage point), Brisbane (0.2 of a percentage point) and Hobart (0.1 of a percentage point).

Conversely, home prices increased in Canberra (0.5 of a percentage point), Adelaide (0.3 of a percentage point) and Darwin (0.1 of a percentage point).  

However, combined regional dwelling values also slipped, falling by 0.2 of a percentage point in August and 0.6 of a percentage point over the quarter, despite a cumulative rise of 1.6 per cent year-on-year.

CoreLogic also reported an increase in housing market activity across more affordable sub-regions, which Mr Lawless attributed to an increase in first home buyer (FHB) activity.

“The trend towards more robust housing market conditions for affordable properties can be seen geographically as well, with the top 10 capital city sub-regions, based on an annual capital gain, generally located in more affordable areas such as Hobart, the outskirts of Melbourne and parts of Brisbane and Adelaide,” the head of research continued.

“On the other hand, the weakest-performing sub-regions are primarily located across Sydney as well as Melbourne’s prestigious Inner East.”

Mr Lawless added: “Stronger market conditions across Australia’s more affordable areas are likely attributable to a rise of first home buyers in the market as well as changing credit policies focused on reducing exposure to high debt-to-income ratios.

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

The national median home value now sits at $552,141, with the median home value across Australia’s combined capital cities at $646,020, and $368,336 across the country’s combined regional areas. 

[Related: Bank rate hikes ‘reasonable’ despite ‘unusual’ market: ANZ]

Charbel Kadib is the news editor on the mortgages titles at Momentum Media.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

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