Figures recently released by RP Data show Australian house prices have now fallen for ten consecutive months.
Across Australia prices are now down over 5% from their peak of December 2010.
Interestingly, if you compare our current decline from peak against the first year decline in the USA when their property market crashed, we’re falling at a faster rate.
Now that might sound dramatic, but consider we currently have a higher household debt to income ratio than the US did at its peak – 154% vs. 133%.
And despite what any vested interests may have been suggesting, there’s no property shortage.
According to SQM Research (www.sqmresearch.com.au) properties listed for sale across the country are at their highest level since December 2008.
A quick calculation shows around 1 in 21 residences across the country are currently for sale.
For all major population centres in Tasmania, the numbers of properties listed for sale are much higher than they were during the previous financial crisis – with the North-West showing the most significant increase in listings.
With debt high and property listings high, sales volumes have also slumped.
Earlier this year the Real Estate Institute of Tasmania released figures showing the number of sales were at a 20 year low.
In the most recent quarter, sales numbers fell again.
Even with the recent reprieve on the interest rate front, the question there remains, “can credit continue to grow at the same levels as it has for the past decade?”
As one of the major factors determining real estate prices, it’s hard to see people borrowing higher and higher multiples of their income in a more debt adverse world.
Analysis from the Commonwealth Bank has even shown the conditions that fuelled the boom are unlikely to be replicated again.
At best, this would result in house prices flat lining for some time to come.
Peter Mancell is a director of Mancell Financial Group and FYG Planners AFSL / ACL 224543. This information is general in nature and readers should seek professional advice specific to their circumstances. If you’d like help with your financial future, we ‘re one of only six fiduciary financial advisors in Australia.
