Australian capital cities at increased risk of property crash: Residex

Jonathan ChancellorJuly 18, 2011

House values eased 1.19% during the past year across Australia, according to Residex, with Brisbane and Perth the worst-performing capitals.

Brisbane’s 5.66% fall to a $441,000 median house price is the largest drop Residex has recorded in any 12-month period for the city. Perth fell 2.2% over the year ending June 2011 to a $475,000 median house price.

Sydney – down 0.47% to a $673,5000 median – is the brightest prospect on the property front, but veteran Residex forecaster John Edwards envisages there are the makings of a perfect storm that could undermine the national property market.

The Melbourne market is Australia’s most at-risk market at the moment, Edwards says, and poor management of the economy by the federal government could easily bring about a “1 in a 100-year” national property collapse.

“Our star is Sydney, which is the market that generally points to the future performance of other markets across Australia.

“The worst-performing capital city, Brisbane, is in trend terms indicating that the worst of its corrections are probably over,” Edwards says.

He says Melbourne is early in its correction phase, with houses dropping 1.1% in value in the last quarter, but up 1.5% for the year at $593,5000. Residex figures have Melbourne unit prices down 1.8% for the June quarter to $448,000.

“Our numbers indicate that Victoria could have a significant stock surplus of something in the order of 24,000 dwellings, mainly in the medium-density market,” Edwards says.

“The net outcome, without careful economic management, could see reductions in value in this market that are considerable higher than those recently seen in Brisbane (where there is more than likely no shortage of stock).

“Overall I view the Melbourne market as our most at-risk market at this time,” he warns.

“Our housing markets are usually a lead indicator to what is happening on the domestic economic front.

“We can often point to potential increases of unemployment in areas of a city by simply looking at how that housing market is performing.

“People stall their buying activity when they think their jobs are at risk or their wealth is falling.”

He says the Reserve Bank narrowly averted a “1 in 100-year event” leading into the global financial crisis by dramatically cutting interest rates.

“Poor management of our economy at this point in time could easily bring about that 1 in a 100-year event that was previously avoided,” Edwards says.

“I’m not against a carbon tax or how it encourages us to be ‘greener’ and work toward reducing the excessive amount of carbon dioxide we are producing.

“However, I do believe there is a sensible process and time to introduce this tax and that time does not seem to be now when we are most vulnerable.

“We don’t need issues that will reduce consumer confidence even further at this point in our economic cycle.”

RESIDEX HOUSE MEDIAN VALUES

 

ACT $540,500 3.3%

Adelaide $403,000 -1.3%

Brisbane $441,000 -5.6%

Darwin $500,000 -0.9%

Hobart $385,500 3.1%

Melbourne $593,500 1.5%

Perth $475,000 -2.2%

Sydney $673,500 0.4%

Australia $437,500 -1.1%

 

RESIDEX UNIT MEDIAN VALUES

 

ACT $421,500 1.9%

Adelaide $312,000 -0.3%

Brisbane $360,000 -3.1%

Darwin $397,000 -5.6%

Hobart $281,500 -2.1%

Melbourne $448,000 0.2%

Perth $396,000 -3.5%

Sydney $485,500 4.43%

Australia $397,500 0.4%

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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