News

Grand final weekend quiet for Melbourne auctions

02 October 2018

The grand final weekend in Melbourne ensured it was a super-quiet week for Melbourne auctions.

Melbourne had 69 auctions for the entire week with just over half getting sold successfully according to CoreLogic figures.

In Sydney, 601 homes went under the hammer last week and they recorded a clearance rate of 49.1 per cent – well below the 64.9 per cent recorded for the same week last year.

SQM Research’s Louis Christopher told the Australian Financial Review that the housing downturn will probably get worse if the banking royal commission recommends another round of regulation tightening.

“It’s hard to see Sydney and Melbourne recovering, at least not for the next year,” he said.

“The real risk is further regulation, which is acute now.”

“What further regulation means is higher costs for banks to meet compliance and more restrictions on lending.”

While Mr Christopher said smaller non-bank lenders will likely step in to fill some of the credit shortfall, it is unlikely to do so enough to drive the housing market.

Former ANZ chief economist Warren Hogan also warned of the stricter lending requirements pushing down prices.

“The drop in house prices seen this year, particularly in Sydney and Melbourne, appears to be the result of banks tightening lending criteria in response to concerns about responsible lending practices emanating from the bank royal commission,” he told AFR.

“This has reduced the quantum credit available to home borrowers in most categories.”

“This should be a one-off impact on borrower capacity. I would expect to see house prices stabilise into the end of the year.”

“This should mean that house prices should have fallen by around 8 to 10 per cent in the major markets from the peak in 2017.”

IFM Investors chief economist Alex Joiner spoke to AFR and said while a property price crash is unlikely, there is still some risk in the current market.

“I’d caution property market participants that the headline-grabbing price crash view is dramatically out of consensus,” he said.

“It would likely require materially higher unemployment amongst other factors to drive such an outcome that are not currently in any economists’ forecasts.

“That is not to say there are not risks. The constriction of credit supply, affordability constraints, elevated indebtedness and the prospect of higher interest rates in coming years are all weighing on property prices.”

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