Housing downturn in big two capitals gathers steam

Sydney house prices have fallen by the most in 18 months as the Iran war and Reserve Bank interest rate hikes compound the decline in the country’s two biggest housing markets.

Median house values ​​in Sydney and Melbourne fell 0.6 per cent in April, property data firm Cotality said on Friday.

Nationwide, house prices rose 0.3 percent, but the growth rate was slowing overall as winds from the Strait of Hormuz strengthened.

Gerard Burg, head of research at Cotality, said affordability and serviceability constraints were weighing on demand.

He said two back-to-back rate hikes by the RBA (the third is likely on Tuesday) and uncertainty caused by the Middle East crisis were affecting sentiment.

“When things get uncertain, people tend to sit on their hands and wait and see, and that’s a pretty negative trend for a high-value purchase like buying a house,” Mr Burg told AAP.

The average Sydney home was still the country’s most expensive at $1.29 million, but Brisbane and Perth are rapidly gaining ground.

The median home in Brisbane, up 1.2 per cent in the month to $1.12 million, is now worth 86 per cent of the Sydney median, up from 76 per cent the year before.

In Perth, the average housing figure rose 2.1 per cent to $1.04 million; this represented 80 per cent of the Sydney reference value, down from 68 per cent the previous year.

At the other end of the scale, the supply picture is improving, particularly in Sydney and Melbourne, where the total number of listings has risen above the five-year average.

“This points to a slightly more balanced market compared to much of last year,” he said.

Mr Burg said the improvement in supply in Sydney and Melbourne was mainly due to more sellers wanting to sell before property values ​​fell further, rather than a significant increase in new construction on the market.

Australia’s chronic supply imbalance will continue to underpin prices for the next few years beyond the short-term cycle.

“When you look at the significant increase in costs we have seen over the last few years, it is becoming increasingly difficult to make new projects feasible,” he said.

The National Council on Housing Supply and Affordability has warned that supply chain disruptions caused by conflict in the Middle East could narrow the housing pipeline by 33,000 new homes over the next three years.

As a major user of diesel, the construction industry is particularly vulnerable to the oil shock, Housing Minister Clare O’Neil told the Property Council summit on Thursday.

He said the government was working to ensure greater fuel supplies but also aimed to make construction easier by reducing the regulatory burden.

“I firmly believe there is too much red tape and regulation around housing, and if we are going to support you to build the homes our country needs, we are going to need to undo that,” Ms O’Neil said.

He said three priorities were identified in the review of the National Building Code: making it easier to use the document with artificial intelligence; reducing regulatory variability across state borders; and restricting new additions to the code that add complexity and cost.

But opposition housing spokesman Andrew Bragg said that for all its talk of cutting through red tape, Labor had little to show for it.

He said building codes are gold-plated, such as requiring grab rails in bathrooms for young homebuilders.

“Only in Australia do you find so much red tape that it makes a cheap house illegal.”

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