Despite the nation-wide property boom, a handful of localised housing markets across the country are experiencing significant price declines, new data has revealed.
Suburbs that have been hamstrung by lockdowns, have weaker rental markets, have an oversupply of units or are more reliant on tourism are most likely to have a weakened property market, according to realestate.com au chief economist Nerida Conisbee.
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Property prices in Cairns North in Queensland and Western Sydney suburb Auburn have slid by 12 per cent in the last 12 months, new realestate.com.au data reveals.
Inner Sydney suburb Redfern has also seen double-digit falls, with dwelling values in this area falling 10 per cent.
Meanwhile, property prices in Queensland’s Burpengary East, and ritzy Melbourne suburb Toorak have declined by 9 per cent.
There are typically four factors that may contribute to a decline in dwelling values, according to Conisbee:
1. Rental markets are weak
Young people make up one of the groups hardest-hit by the pandemic, with these people highly exposed to the hospitality, education and tourism sectors which are still struggling to recover from the lockdowns.
So areas that have a high volume of local and international students, as well as tourists, are seeing a weaker property market.
In the case of NSW’s Auburn and Redfern, it’s only one section of the market dragging prices down.
While house prices in these suburbs are performing strongly, units are struggling to keep up.
“It is the unit market that is weaker. It is primarily because they are more highly exposed to renters, particularly students,” Conisbee told Yahoo Finance.
Though the unemployment rate is coming down, youth unemployment is stuck at nearly 14 per cent, she noted.
“In addition, while prices are unlikely to be hit by withdrawal of stimulus this month, some rental markets will be.”
2. Unit prices take a beating
Weak rental markets also feed into lower unit prices, which have been on a downward trend for several months now. Six of the 10 suburbs suffering the biggest price drops have been concentrated in the unit market, the economist noted.
“This is being driven by low levels of investor activity over the past year, which is starting to turn around, as well as poor performance of rental markets,” Conisbee said.
3. High reliance on tourism
Units in Cairns North top the list for highest property price declines, and this is due to the loss of international visitors that typically flock to the Queensland city.
“Cairns’ reliance on tourism is a big factor in its relatively poor performance,” Conisbee said.
And it’s not just units – the city is not a popular destination among holiday home buyers, she added.
“It is one area that hasn’t benefited all that much from the shift to regional Australia.”
4. Fall-out from the lockdown
Melbourne went through three lockdowns, and this has stifled the local housing market, even in higher-end suburbs, Conisbee indicated.
“Premium suburbs are overall doing very well, however Melbourne’s prolonged lockdown appears to have delayed Melbourne’s luxury recovery.
“Median prices for houses and units have declined in Toorak over the past 12 months with units hit particularly hard.”