Worst quarter in Sydney since March 2005 and in Melbourne since September 2008

This article is more than 1 year old

This article is more than 1 year old

Property price declines in Sydney and Melbourne are no longer confined to expensive dwellings, with the price falls spreading to middle and lower segments of the market.

Bureau of Statistics figures show property prices in Australia’s eight capital cities fell 1.5% on average in the September quarter, marking nine consecutive months of price declines.

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The mean price of Australia’s residential dwellings is now $675,000, down from a peak of $697,100 at the end of 2017. Despite the decrease, the mean price is still $188,600 higher than it was six years ago.

The nationwide decline in property prices is being driven by large falls in Australia’s two biggest property markets: Sydney and Melbourne.

The average decline is masking very different property market conditions around the country.

Sydney recorded its worst quarterly performance since March 2005, with property prices falling 1.9% in September quarter.

For established houses, falls were observed across most segments of the market, with weakness most evident in the middle to upper segments ($990,000 to $1,400,000).

Sydney’s price declines are gathering pace. After increasing in the June quarter of 2017, its residential property prices have been constantly declining: -1.4% (Sept 2017), -0.1% (Dec 2017), -1.2% (March 2018), -1.2% (June 2018) and -1.9% (Sept 2018).

Melbourne also recorded its worst quarterly performance since September 2008, with prices dropping 2.6% in the September quarter.

For established houses, falls were observed across most segments of the market, with weakness most evident in the lower to middle ($650,000 to $1,015,000) segments. The last time prices rose in Melbourne was in the December quarter of 2017.

However, price behaviour is mixed across the country.

The capital city residential property price indices also fell in Perth (-0.6%) and Darwin (-0.9%) in the September quarter, but they rose in Brisbane (0.6%), Adelaide (0.6%), Hobart (1.3%) and Canberra (0.5%).

Over the past 12 months, residential property indices have fallen in Sydney (-4.4%), Darwin (-4.4%), Melbourne (-1.5%), and Perth (-0.5%), but they have risen in Hobart (13%), Canberra (3.7%), Adelaide (2%) and Brisbane (1.7%).

Bruce Hockman, the ABS chief economist, said tightening credit availability and falling property prices were weighing on activity from investors and owner occupiers, particularly in the Sydney and Melbourne markets.

“Results are in line with market indicators, with auction clearance rates and sales volumes falling and days on market trending higher,” he said.

Last week, the Reserve Bank warned Australia’s biggest banks not to restrict their lending too much during the current housing downturn, cautioning if borrowers were scared away it would negatively affect the economy.

Guy Debelle, the RBA deputy governor, said one of the key lessons policymakers learned from the global financial crisis was the critical importance of keeping lending flowing, and “that lesson is relevant to the situation today in Australia”.