Now Home Prices Are Sliding, Who Takes The Fall?

Hinzugefügt: 2026-05-24

[00:00:00]Today, now home prices are sliding. Who takes the fall?

[00:00:15]Hi again, this month North from Digital Finance Analytics on this post covering finance and property news. Well, let's face it, the off quoted Australian property prices only go up was always a lie. But the religious belief that prices double every 7 to 10 years is now in pieces as more data shows momentum building towards a significant correction. The latest from Catality's dwelling values index shows that we are building towards that correction across the five capital city aggregate index.

[00:00:47]Although there are still significant variations across cities and property types. My point is that prices were already turning lower thanks to the higher interest rates imposed by the RBA who is chasing stubbornly higher inflation driven by high government spending and poor productivity as well as easing migration though it's still too high. And now of course the federal government's changes to negative gearing and capital gains taxes which were announced in the latest budget and which will exacerbate the downside as they end the 50% capital gains discount and also access negative gearing for established dwellings. Now while the loss of tax benefits gave would be probably investors the most reason to step back from the established housing market. New bills of course are exempt from the changes, but even first home buyers already daunted by high mortgage costs and affordability are going to be very cautious as the markets continue to weaken. Last week, Morgan Stanley analysts suggested that house prices nationally could fall as much as 10% in the largest correction in the past 40 years as the market absorbed Labour's tax changes. They said the housing downturn will have far-reaching effects for owners and investors as well as major corporate developers, the broader economy, and even the Reserve Bank's view of interest rates in their report titled the game has changed for housing.

[00:02:22]They said the previous model of high leverage, cash flow losses, and large expected capital gains is meaningfully challenged. Low expected returns as well as more constrained borrowing capacity will cause investor demand to drop sharply and require a higher rental yield to be compensated. We expect this adjustment to occur primarily through price. They said investors are the first line to feel the impact of the tax changes and Morgan Stanley estimates that'll require price falls between 15 and 20% just to make the economics of investing stuck up again. Actually, we've already seen investor loans being reassessed by lenters with borrowing power reduced by up to 30% by the changes announced in the budget. or Morgan Stanley expect the sharp decline in investor demand to be partially offset by owner occupiers and investors in new bills who will still gain existing tax benefits under Labour's budget plan. They expect the adjustment will take time and result in lower prices. And of course, the question is, can you even find a builder? And can they build at a price that makes sense in the current inflationary environment?

[00:03:38]And they went on to say, "We estimate that housing prices would need to fall 5% to adjust to the tax changes with a permanent reduction in investor demand share, but taking into account the soft starting point for housing with RBA rate hikes, we see a 5 to 10% drop in national prices as likely, which is one of the largest price corrections in the past 40 years. Larger declines could come from more fundamental changes in investor price expectations or a slower than expected usual policy response. I note migration by the way is important as in my models. It's another significant influencing factor and the budget of course predicted a further rise in migration at least in the short term. And as reported in the AFRSQM's Lou Christopher said the outlook remained grim for the country's two largest property markets based on our modeling housing prices likely to fall up to 9% in our two largest capitals this calendar year. He said the live reality on the ground is the housing market is tanking in Sydney and Melbourne. At the beginning of this year's property season it was a normal market and auction clearance rates were far high. He said, "Then the interest rate outlook changed and the February rate rise knocked the wind out of the market. Then the war came along and it took the market another leg down."

[00:05:06]However, while Commonwealth Bank of Australia chief economist Luke Yeaman agrees that Labour's proposed tax changes have shaken some investors with the impact to flow through into the market over the coming months. We find that national house prices could be around just 3% lower over the next three years as a direct result of the changes with larger impacts on investor heavy segments of the market such as apartments and town houses. He said so even CBA is calling a downturn. The early market indicators are represented in the auction clearance data does confirm the weakness. Nationally 58.2% 2% of homes sent to auction was sold based on the early numbers from totality.

[00:05:51]Although of the 2,339 properties listed for auction, only 1,667 were reported so far. The trends are clear. If you look at the AM chart of Sydney and Melbourne clear rates over time, even take into account the recent holidays. While that clearance rate figure was slightly up on the previous week's early clearance rate of 57.5%, it does mark the sixth week out of the previous eight where auction clearances stayed south of 60%.

[00:06:26]The true clearance, which we calculate comparing the listed to sold data, came in at a very weak 41.4% and it's again flattered by agents more likely to report successful than unsuccessful results.

[00:06:41]Sydney cleared 56.9% of 823 properties sent to auction based on the early figures. That's up from the previous week's 49.2% which was updated to just 43.1% on the final numbers. True clearance was 40.6% and we note that vendors are yet to flex their expectations on price in many cases across greater Sydney. Meanwhile, Melbourne's permanent clearance rate hovered around 60%, recording any clearance of 60.2%, slightly down from the previous week, 61.4%. True clearance was 44.9%.

[00:07:18]And here in Melbourne, vendors are getting used to dropping price expectations to gain a sale, perhaps seeking the proverbial greater fall.

[00:07:28]In the smaller capitals, Brisbane cleared 45.7% of 194 homes sent under Hammer with a true clearance coming in at 29.9% while Adelaide recorded an early clearance of 72% across 135 homes, but a true clearance of 40% and Perth reported just seven auctions so far in total.

[00:07:50]Now we should expect more weakness ahead because there are really no signals other than har migration to support upside in the market. Everything else is pointing down.

[00:08:03]And as the Guardian reported at the Victorian Labor state conference on Saturday, Anthony Albanese said the budget tax reforms were the right thing to do, not the easy thing, and would rebalance the housing market towards first home buyers instead of property investors. and he said every Saturday young people were missing out at auctions because they were bidding against investors who had the Australian taxpayer on their side because of the tax breaks that are there. It's not an equal process, Albanesei said, because if it's a matter of an extra 20,000 to bid or 30,000 to bid, they know that they can do that in the comfort that it will be an increase in their tax deduction that all of you and every Australian taxpayer is their partner here. But if you're trying to buy your own home, you don't have that. And that is why, put it simply, we are reforming negative gearing on capital gains.

[00:09:02]And this was the point in the speech that party members and unions gave Albania a standing ovation with the prime minister appearing to well up at the response.

[00:09:13]Now, of course, I do support changes to negative gear and capital gains. No doubt about that. It needed to be done, but it should have been done a long time ago. Alwanesei went on to say Labour is the party of aspiration a direct rebuke of criticism including from the shadow treasurer Tim Wilson that the budget was a war on the selfstarters and small businesses. We will not allow Australia to become a country where aspiration is only for some. Our reforms are about backing aspiration for all. Bringing the great Australian dream of home ownership back in reach for the new generation.

[00:09:47]And Albanese said, "Our changes are proasporation and pro- supply so we can help people get into a helm of their own."

[00:09:57]And a visibly emotional anti-helm launched the impassion defense of Labour's proposed changes to negative gearing in the capital gains taxes and family trust saying he will not allow Australia to become a country where aspiration is only for some.

[00:10:14]Alani actually said the changes add up to a better tax system particularly for people who work their gut out for a wage and will never be able to access a trust. They have never sat around the kitchen table and thought of settling for trust. I mean seriously, he said the biggest investment that the majority of Australians ever make and the biggest hope that they ever have is to work hard and buy a home of their own. When you know that the next generation is doing it tougher than my generation, then you're got to do something about it. And that's why we rebalancing the way that working Australians pay tax.

[00:10:52]Actually, earlier in the week, Labour MPs told Garden Australia that while they were confident the negative gearing and CG changes were ultimately good and important, the government needed to do a better job of explaining and selling the reforms.

[00:11:06]and another Labour politician worried the government had failed to effectively explain the complex tax changes, lamenting, "I feel like we don't necessarily have a clear strategy on complicated issues." Speaking in Sydney on Saturday, the energy minister Chris Bowen denied the government had underestimated the blowback on the reform. "This was always going to be a controversial budget," Bowen said.

[00:11:28]"We've been undertaking big tax reforms.

[00:11:31]There's always going to be some people who are upset by that. The government knew that, but he said the changes were important for intergenerational equity.

[00:11:39]Yes, that will sometimes be controversial, but big reforms are controversial and they're worthwhile, Bowen said.

[00:11:48]And across town in Corfield, the federal opposition leader Angus Taylor addressing the Victorian Liberal State Council meeting where he described the budget as an attack on young Australians and an assault and aspiration said it will crush the reward for hard work spirit that underpins our nation's success.

[00:12:09]And he reaffirmed his commitment to repeal the proposed reforms if elected.

[00:12:15]And I think the critical issue is that the debate has moved towards some of these other tax reforms, not those directly related for housing. And that is not necessarily good to have a balanced view of what is going on. So this takes us to a critical question.

[00:12:32]Have politicians effectively broken the property market by their action in recent years? And as property insider Edwin Almeida posed in a thought experiment, what if the biggest property shock isn't rates or budgets or property cycles, but politics?

[00:12:56]Maybe this is a future headline worth considering and it's something we're going to discuss on our Monday evening property rant because of course property is politicized.

[00:13:08]But the truth is, as prices continue to weaken, recent firsttime buyers, especially those on the 5% deposit scheme from last October, risk slipping into negative equity. And more property investors are finding their cash flow on their investment is actually negative as measured by net rental yield. Something I discussed in a recent live show. In a time, of course, of falling values driving them to sell or lift rents. And there are some downsizers who now have to redo their sums based on low equity values on their homes. So all this means that some in the rental sector will be confronted by further rent increases.

[00:13:53]Some property investors will seek to quick the market even as a loss. And some firsttime buyers will be caught in the crossfire with negative equity while those seeking to buy into the market will pause waiting potentially for further falls. In other words, quite a few households will be taking the fall, which begs the question, will the government end up with egg on its face, too, or can they spin their way out of reforms which were certainly long overdue in the property sector, but which potentially have been extended to a broader revenue raising exercise worth somewhere about 3.5 weeks worth of NDIS funding in 2013. 30 with little gained in the short term. So, frankly, well, it's a mess. Now, if you're buying your home in Sydney's contentious market, you don't need to stand alone. This is the time you need to have Edwin Almeida from Ribbon Property Consultant standing alongside you. Buying a property is both challenging and adversarial. The vendor has a professional on their side.

[00:15:01]Emotions run high. Price discovery and price transparency are hard to find. And then there's the wasted time and financial investments that you make.

[00:15:08]Edwin understands your needs. So why not engage a licensed professional to stand alongside you with RPC? You know you have experience, knowledge, and master negotiators looking after your best interests. So shoot Ribbon an email at [email protected].

[00:15:25]And if you use the promo code dftw/mart, you can get a 10% discount offer. I'm Martin North from Digital Finance Analytics. Many thanks for watching and I'll see you again next time.

[00:15:48]Heat.