House prices across Australia plummeted 2 per cent over the June quarter, but there’s one tell-tale sign that prices will drop even further, experts say.
And according to REA Group chief economist, Nerida Conisbee, a rapid rise in listings can indicate market weakness - and therefore price falls.
“This is because it can represent a level of distress in the market – if a lot of people are looking to sell, it can mean they are either financially stressed (as an owner-occupier) or not achieving the investment goals they wanted to such as capital or rental growth (as an investor),” she said.
However, there’s one caveat to that: more listings could also represent market confidence, she said.
“People tend to buy and sell more when the property market is good too,” Consibee said.
“In fact, the last time we saw a drop in listings was when the market was very weak.
“During the Financial Services Royal Commission, listings were well down. They did in fact bounce back up once the Royal Commission was over and confidence returned to the market.”
And as listings grew, so did prices, Consibee said.
Will there be further property price falls this year?
Conisbee said the increase in listings in most locations doesn’t appear to be driven by a high level of distress, and therefore might not indicate future price falls.
“Prices are overall remaining relatively steady – again, surprising given that we are heading into a recession and seeing rising unemployment,” she said.
According to the Domain House Price report for the June quarter, house prices dropped $32,000 in Melbourne and $23,000 in Sydney.
“We can see that buyers continue to be very active – both through search and enquiry.”
However, the property market is being supported by Government stimulus measures, and if our banks stop offering mortgage payment freezes to borrowers, it’s likely that distress would be rising more rapidly, she said.
And even though we aren’t currently seeing high levels of distress, there are some markets that are challenged, she said.
“This includes suburbs with a large number of apartments that are rented to overseas students – rental listings continue to rise in these areas,” Conisbee said.
“This will be a challenged market until foreign students return. The other market that isn’t doing well is where there is apartment oversupply, however this was a problem prior to Covid-19 – low rental demand is exacerbating the problem.”
Koukoulas estimates that based on current demand and supply levels, the unemployment rate and the record-low interest rate, prices could fall by as much as 15 per cent in the second half of 2021.
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