Property Sales Under $400k to Drop in 2020

More than a quarter of all houses that transacted across Australia were under $400,000 in the 2019 financial year, while 32.5 per cent of all unit sales were under the $400k mark for the period.

Despite the nation’s falling dwelling values there has been no noticeable rise in sales under $400,000, CoreLogic data reveals.

“The share of house sales under $400,000 was virtually unchanged from a year ago,” CoreLogic Research analyst Cameron Kusher said.

“Down from 26.3 per cent the previous year while the share of unit sales under $400,000 increased from 31 per cent over the 2017-2018 financial year.”

Apra’s removal of the minimum 7 per cent interest rate floor in assessing repayment capacity, combined with interest rates now at historic lows, are expected to drive demand, and subsequently, dwelling values in Australia’s housing market.

“While a significant rise in dwelling values isn’t expected, there is an expectation of a moderate increase in dwelling values,” Kusher said.

“As a result the 2019-2020 financial year is expected to see fewer sales under $400,000 than those recorded in 2018-2019.”

Delinquencies to rise “only moderately”

Latest research from Moody's Investors Service says high household debt combined with low wage growth continues to pose downside risk to Australian residential mortgage-backed securities.

While RMBS remained low in the first half of 2019, Moody’s latest report expects this to “rise moderately over the coming quarters”.

“High levels of debt, the conversion of a large number of interest-only mortgages to principal and interest loans and moderating house prices will weaken the performance of Australian RMBS,” Moody's Analyst Jacqui Dredge said.

“But the impact will be limited given stable GDP growth, low unemployment and recent interest rate cuts.”

Australian house prices declined by an average of 6.9 per cent over the year to June.

Sydney prices led the decline, down 9.9 per cent over the 12 month period, Melbourne recorded a 9.2 per cent drop, and Perth a decline of 9.1 per cent. Prices have declined moderately in Brisbane, with a fall of 2.6 per cent for the 12-month period, and Adelaide down 0.3 per cent.

Moody’s says Australia’s house prices have declined at a consistently slowing rate since December last year, with prices appearing to have “broadly stabilised towards the end of the first half of 2019”.

Moody's forecasts that Australia's real GDP will grow by 2.5 per cent annually in 2019 and 2020.

Australia's GDP grew 1.8 per cent in the twelve months to March this year, the weakest growth level since September 2009.