00:00Australia's housing market downturn is worsening with prices declining in June and July by the
00:04most since December 2022 comes as rising interest rates and tax changes weigh on buyer demand so
00:10joining us now is Anne Flaherty who's the senior economist at REA group and really great to have
00:15you with us so largely this is by design right is this sort of the the extent of declines that
00:21you would have expected given some of the tax changes and the burden of rate changes as well
00:29look I think that it's certainly the impact of higher interest rates that have limited home
00:34prices and are contributing to the falls understanding the impacts of the tax changes
00:39I think is still going to take a bit more time it does seem clear that investors have pulled back
00:44which has reduced overall buyer demand but I do think that the extent to which this impacts prices
00:50over the coming months and into next year is still unfolding
00:55where do you see the plateau because certainly there is almost a sense of uh I don't want to
01:00say panic but sentiment has been really hard hit in capitals like here in Sydney particularly in sort
01:05of the the the inner city and eastern suburbs and some of the suburbs have seen some of the biggest
01:10price gains yeah look I do think there is a lot of panic out there and we have been seeing
01:17some
01:17reasonably substantial monthly falls so in Sydney home prices were down more than any other capital
01:22city in the country at point six percent over the month um but I think that in terms of where
01:26the
01:26floor is that remains to be seen that there is the chance that we could have interest rates increased
01:31again before the end of the year um and if that does happen that could increase the rate of home
01:36price falls but also at the moment there's still a lot of uncertainty and I think that we're likely to
01:42continue to see prices fall through to the end of the year whether those falls continue into next year as
01:47well I think it's going to have a lot to do with the total stock of homes on the market
01:51what happens
01:52with interest rates and inflation um and of course what the final fallout of the budget ends up being
01:59once this sort of panic starts to subside a bit
02:04sticky inflation of course remains a key concern for the RBA but now there is a concern that they're
02:10getting into the situation where we're going to see household confidence being impacted so much by
02:14the property market do you think this is going to be the next conundrum for the RBA and potentially
02:18prompt as Bloomberg economics is predicting a sooner than expected cycle of easing
02:26well one of the reasons why we've seen such short property price downturns in recent years is to do with
02:32the fact that um interest rates have been decreased which has led to that recovery in home prices
02:37we're in a situation now where inflation looks like it's going to be high for quite some time so
02:41even if we see interest rates hold steady um we're not looking at rates coming down over the short term
02:48so I think that buyer budgets are still going to be constrained for quite some time of course where
02:53interest rates sit has a very strong impact on how much buyers can borrow so until we do see interest
03:00rates start to come down or perhaps see um a significant slowdown in homes being listed for sale
03:05I think that there's certainly capacity for further house price falls we've already started to see the
03:12flow on impact when it comes to uh consumer facing stocks for example there's real concerns that that's
03:18going to eat into that part of earnings season have you started to see the pass through the data on
03:23consumer confidence household spending retail sales and the like
03:29look how consumer sentiment has been quite weak um however we actually did see a slight improvement
03:36in terms of that overall consumer confidence uh in in june so I think that as far as uh time
03:43to
03:43buy a dwelling goes you know on realestate.com we are still seeing a lot of buyers monitoring the market
03:48so there's still a lot of interest out there but I think that what we're seeing is that transaction
03:53activity has slowed down and a part of that is to do with fewer investors in the market but it's
03:58also
03:59to do with buyers like first-time buyers upsizes biding their time until uh prices fall further when
04:06they might get a better deal what's also interesting is at the moment you're seeing this real mismatch in
04:12the market right prices are falling sellers expectations are not being met but buyers expectations
04:17perhaps are not being met either because we're seeing a lot of unsold housing stock when it comes
04:24to the the point of these tax changes which is to drive greater housing affordability to kind of you
04:30know dispense that housing across a broader sector as well as to add rental capacity do you see that working
04:38well in terms of affordability lower home prices do make things more affordable
04:44um in terms of rental capacity though i i doubt that this is going to be the outcome i think
04:50that
04:51um new dwellings which the government is hoping that investors flock to new dwellings they make up a
04:56very small share of the total number of dwellings out there and actually um the majority of new housing
05:01being delivered is extremely expensive new apartment developments and house and land packages in outer
05:07areas so in terms of adding the supply of affordable rental properties in those inner and middle ring
05:13suburbs we're not seeing um much of that at the moment and with this decrease uh in incentives for
05:19investors um we're likely to see that those kinds of rental properties become increasingly constrained
05:25and rental vacancy rates tighten which could push rents even higher than they are now
05:32taking into account what market expectations are of what the rba does by december which at the moment i
05:37think is a sort of 50 50 chance of one further hike by the end of the year where do
05:42you see home
05:42prices potentially stabilizing look we think it's going to come down to how long it takes for these
05:52impacts to flow through and i think it's also going to really depend on the market what we've been
05:58seeing is a bit of a different trend in terms of those properties that are at the more affordable
06:03end those properties in particular that come in between in the price thresholds that are available
06:08through the government's five percent home deposit scheme they are more resilient some of those areas
06:13are still continuing to record growth whereas the more expensive suburbs where people typically have
06:18to take out larger mortgages that make them more susceptible to higher interest rates um those are the
06:25areas that have been seeing the stronger falls and are likely to see falling home prices for longer
06:33and really great to have you with us and sardy who's the senior economist at rea group would you
06:37have more on australia head that's every tuesday at 10 40 a.m if you're watching in sydney 8 40
06:42a.m if
06:42you're catching us in hong kong plus you continue into the bloomberg australia podcast delving into the
06:47biggest stories shaping the country's role in global business you can find that on apple spotify or
06:53bloomberg.com more ahead here on the asia trade this is bloomberg
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