The national property market after the budget changes has become ‘more complicated than simply lower house prices’, a prominent housing economist warns.
The national housing market continues to slump with a trio of negative forces squeezing property. Price are dropping, rents are rising and building cost are hampering supply.
The housing market is showing “clear signs of the changes announced in the May budget”, Ray White chief economist Nerida Conisbee said on Monday. And the new norm could take a while to work through as sellers fail to adjust their expectations and more homes languish of market for months on end.
Across the capital cities, prices fell 4.3 per cent over the September quarter with a growing number of economists tipping national prices to drop by between 10 to 15 per cent by the end of the current downturn. At the same time, rents are up by 5.5 per cent in the quarter.
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“In a market where rental supply was already tight, fewer investors means more pressure on rents. Lower house prices therefore do not necessarily mean housing conditions are becoming easier,” Conisbee wrote.
“The next problem is new housing. Since the end of 2019, the cost of a new dwelling has risen by around 48 per cent,” she noted, including 5.4 per cent higher over the year to August.
Falling prices but elevated building and labour costs mean developers increasingly won’t be able to make the numbers work to bring much needed supply into the market.
“The problem is the feedback loop this creates. Higher interest rates are pushing established prices lower and the budget has further weakened the supply of rental properties. Lower established prices then make new development harder to stack up. If fewer projects proceed, fewer homes are built and the housing shortage becomes worse,” Conisbee said.
The economist argued “the post-budget market is therefore becoming more complicated than simply lower house prices.”
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Houses not selling for months: ‘Something has gone seriously wrong’
According to analysis from one property data firm, more than a quarter of homes are sitting on the market without selling for six months.
Including regional markets, 28 per cent of listed homes have been sitting on the market for more than 180 days, the SQM Research analysis shows.
In Melbourne, that number was more than 21 per cent, but was lower across Sydney at 18 per cent, although certain suburbs such as the inner city suburb of Pyrmont has 34 per cent of listed homes langusihing for half a year.
