House prices gradually trending down

16 December 2004

Australian Bureau of Statistics (ABS) data today showed that new construction activity in the housing sector slumped 5.8 per cent in the September quarter.

CommSec Quantitative Research today reported that housing prices across the country stabilised in the last quarter, according to revised trend estimates of ABS data.

The trend in Sydney's established house prices fell just one per cent in the September quarter, and trend house price growth was now hovering around the zero mark in all major cities, the report said.

Commsec head of research Ron Bewley said house prices were now entering a plateau phase.

"Sydney house prices are gently gliding to a plateau and are not falling sharply as some have feared," Mr Bewley said.

House price growth across the nation continues to moderate as the smaller capital cities follow the lead of Sydney and Melbourne.

Mr Bewley said the ABS incorrectly reported in September that Sydney house prices fell sharply in June 2004 by 5.4 per cent, sparking speculation amongst commentators that worse was to come.

"However, revised estimates of minus 1.4 per cent growth in Sydney show that the fall was much more modest than previously thought," he said. "Our research maintains that large scale and sustained falls in house prices at this stage are unlikely. He stated that "An extended house price plateau is a much more likely scenario."

Also today, the ABS said the total number of new homes begun in the three months to September fell 5.8 per cent to 40,263, the third consecutive quarterly fall.

Allowing for seasonal factors, building on new stand-alone houses - as opposed to apartments - fell 8.7 per cent to 26,104.

Commonwealth Bank of Australia chief economist Michael Blythe said the data indicates that the housing market slowdown is increasingly affecting residential construction activity.

Mr Bewley said "Building approvals are pointing to another fall in the fourth quarter." 

The downturn to date is relatively modest compared with past cycles.

Current levels of construction activity are running pretty much in line with underlying demand at present.

RBC Capital Markets senior economist Michael Every said the latest data underlines the recent slowdown in the housing market, but is in line with other recent housing data.

"Market impact has been limited, and with a housing slowdown already broadly accepted and short yields so far below cash rates, the data would have to have been extremely weak to prompt a major response," he said.

Yesterday, the Housing Industry Association figures showed there have been 3000 fewer investors in NSW every month since June, when the state government introduced a tax on the sale of investment properties.

And the number of auctions listed for the 2004 spring season fell by almost 50 per cent, with sales hitting their lowest level since 1988, (not including the Sydney Olympics year of 2000).