December 2018

This is the 8th in a series of articles summarising monthly news and happenings in Sydney real estate, and more broadly.

Goodbye 2018 Hello 2019

In this belated and slightly short December happening and events in the Sydney real estate market, there are no new monthly updates from Corelogic, however a simple lack of empirical data is not enough to stop people speculating on the housing market!

For example, although it’s likely a foregone conclusion, says that Sydney’s real estate slump will carry on throughout 2019, exerting downward pressure on prices. They make the point that these declines would likely differ over the different market segments. For example, that detached house prices are expected to fall more sharply, compensating for the sharper previous increases (What goes up must come down apparently).

Softly, Softly

Some slightly good news for the market is that from January 1st, APRA has removed both the banks’ interest-only loan threshhold, and the benchmark on investor loan growth. According to APRA both benchmarks were put in place in order to ‘reinforce sound residential mortgage lending practices’, and now most banks appear to have satisfied this there is no need for them.

Corelogic’s head of research Cameron Kusher downplayed the change to interest only loans as not exactly being ‘monumental’ considering that the threshhold had barely even been half met anyway (16.5% of loans against the potential threshhold of 30%). However, perhaps the removal of the threshhold on investor loan growth may have some impact. Time will tell.

Looking ahead, APRA also announced in the same letter above, as a result of the improvements in banks’ lending standards (no doubt at least partially due to the Royal Commission), they plan on conducting a review on banks’ risk controls in 2019. What this means is as yet unclear, however what can be derived from the overall tone of the letter is that the better the banks behave, the more slack they will be cut.

Reality Check

In regards to the general state of the market, and based on Corelogic data, the ABC has a very cool interactive map which gives detailed breakdowns for housing prices trends throughout the capital cities as well as some very interesting data about the different housing market downturns. It shows that as at the end of December, the current housing market decline has fallen to about the same extent as the 1989-91 decline, albeit in a somewhat shorter period.

The same page also has a ‘How has your neighbourhood fared?’ section where you can type in a postcode or suburb and see where you are in the mix including exactly (whether, and) how much your property has dropped in value

Having said that, it’s worth repeating that home owners are still generally in a better position than they were 5 years ago, so it’s all relative.

This graph shows where the current downturn rates against previous downturns. Attribution: