Australian capital cities have seen property prices drop in September according to new research from AMP Capital.
Dwelling prices in Australian capital cities were down by 0.6 per cent in September, a figure which marks an entire year of consecutive price declines, since they peaked in September last year.
Across the board, prices are 3.7 per cent lower in comparison to 12 months earlier. This marks their lowest point since 2012. Several factors have contributed towards this decline, including tighter lending standards. Out of cycle interest rate rises from the banks on mortgages are also considered to be significant towards the price drops.
For example, in markets such as Sydney and Melbourne, the areas which carried the lion’s share of price hikes since 2012, there is likely still further for prices to fall.
Price decline in Australian capital cities could also be exacerbated by federal policy changes, such as restrictions placed on negative gearing. This places an element of risk for overseas property investors as there has been discussion of a crash of some sort in the market.
AMP Capital’s chief economist, Dr Shane Oliver explained: ‘We continue to expect these cities to see a top to bottom fall in prices of around 15 per cent spread out to 2020’
However, he said that a major crash remains unlikely, unless other significant economic triggers materialise.
Dr Oliver continued: ‘A crash landing, say with 20 per cent plus average price falls, remains unlikely in the absence of much higher interest rates or unemployment, but it’s a significant risk given the difficulty in gauging how severe the tightening in bank lending standards in the face of the royal commission will get and how investors will respond as their capital growth expectations collapse at a time when net rental yields are around 1-2 per cent.’