More than $130 billion has been wiped off the value of Australia’s homes in the December quarter, according to the latest ABS data.
Sydney’s property price decline is now more acute than during the global financial crisis.
Sydney property prices fell 3.7 per cent in the December quarter, while Melbourne property prices recorded their fourth consecutive quarter of falls, declining 2.4 per cent.
Economic forecaster BIS Oxford Economics said house prices in Sydney and Melbourne are falling at a faster rate than historical benchmarks.
The period of decline in Sydney and Melbourne since late 2017 has been much shorter than the longest downturn duration, with BIS economist Angie Zigomanis pointing out that the current downturn may have at least another year to run.
Perhaps more surprisingly, Melbourne is falling at a much faster rate than Sydney.
At 15 months into Melbourne’s downturn, values have fallen 9.6 per cent compared to a decline of 8.2 per cent 15 months into Sydney’s downturn.
Melbourne’s largest previous house price slump was 10 per cent in the early-90s recession — between 1989-92 — which, at 36 months, is much longer than the current downturn.
• The value of Australia’s 10.3 million dwellings fell 5.1 per cent over the year
• Over the December quarter, Property prices fell in Sydney (3.7%); Melbourne’s (2.4%); Brisbane (1.1%); Perth (1%); Darwin (0.6%) and Canberra (0.2%).
• Adelaide (+0.1%)and Hobart (+0.7%) were the only capital cities to record an increase in values.
• The mean price of dwellings in Australia is now $651,100.
The RBA has indicated that they will move to cut interest rates when the labour market deteriorates, adding wind to the sails of the ever-growing camp that the central bank will cut interest rates twice this year.
Australia’s rapidly declining house prices are weighing on household spending and growth, with RBA members pointing to developments in the labour market as “particularly important” to Australia’s economic outlook.
RBA said it would continue to monitor the outlook carefully.
“Given that further progress in reducing unemployment and lifting inflation was a reasonable expectation, members agreed that there was not a strong case for a near-term adjustment in monetary policy,” the RBA minutes said.
Capital Economics economist Ben Udy said the bank is placing a lot of weight on the labour market and providing hints that it is moving toward cutting interest rates.
“If the unemployment rate does start to tick up before long as we anticipate, the Bank will probably start to cut interest rates fairly quickly,” Udy said.
However, the bank did note that in other developed economies slower labour markets and upward pressure on wages had not necessarily translated into materially higher inflation.
The board met March 5.