More up-to-date data supplied by private survey groups suggest the price decline has steepened. For example, the CoreLogic group claims the Sydney median house price was down 8.9% in the year to December and 11.1% from its peak in July 2017. In the 1989-1991 period Sydney prices fell by a record 9.6% so it appears that the record has now been broken. Melbourne prices are claimed to be down 5.8% in the 12 months to December and 7.2% since their peak in November 2017. The median house value in Sydney is now AU$808,495 whilst the Melbourne median value is AU$645,123. Perth and Darwin have suffered far more with cumulative falls of 15.6% and 24.5% since their respective peaks.
Housing in Australia is a sacrosanct topic. To suggest that prices may fall is to be considered a fifth columnist – or at best, simply foolish. Everyone owns their few square metres of paradise and that is their nest egg that must do nothing but go up in value. Of course a great many have taken it much further and used negative gearing to buy a property investment portfolio that is their path to great riches. Negative gearing is a perfectly legal rort whereby investment properties are sufficiently leveraged to ensure that rental returns do not cover interest payments and outgoings. The loss may then be offset ordinary income such as salary. It means that Australia’s diminishing supply of net taxpayers help fund that path to riches – provided, of course, that prices continue to rise. And that is clearly a very significant “provided”.
We simply look at the fundamentals. The Australian public (and the banks) are extremely leveraged into property at a time when real income growth is static and the personal savings ratio is plunging (8% in 2014, 5% in 2017 and in the September quarter this year just 2.4%). On an international scale householders top the indebted list – relative to disposable income.