Cooling Off

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A cooling off is occurring in Sydney's Eastern Suburbs residential market for properties especially at lower price points.
The eastern suburbs market is currently witnessing some mixed results which vary between market segments and property types, according to the June report from the valuation firm Herron Todd White.
The first quarter of 2018 started fairly stably however more recently has seen some softening in values, extended selling periods and auction clearance rates falling to 68.3% as of 27 May, compared to 79.4% at the same time last year, t.he report noted
The stronger sector of the market is currently good quality prestige houses in the $5 million to $10 million price range.
The reported quoted prominent eastern suburbs agent, Alexander Phillips, stating that “it’s harder to sell a $900,000 apartment by the beach than a house for $8 million in Bellevue Hill in the current market”.
As he points out, it’s just harder to borrow money, which is reducing the buying power for people looking for apartments.
“If you had a two bedroom apartment in Bondi open for $900,000 you’d get four or five groups, but if you had a house priced at $6 million or $8 million in Bellevue Hill you’d get 20 groups... there are just more buyers at that price point at the moment,” he said.
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6 Latimer Road, Bellevue Hill which sold on 12th May for approximately $8,600,000 after the first open home and three days on the market (above). 
"While the prestige housing sector remains somewhat stable, the general unit market is showing signs of market resistance compared to previous years", according to the valuation firm.
A Bellevue Hill unit was originally passed in at auction, then set an asking price of $929,000 which was further reduced to $890,000 and was then sold for $870,000.
"Although not a significant reduction, this is something very rarely seen in the eastern suburbs over the past several years," HTW noted.
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10/175 Victoria Road Bellevue Hill is a typical 2 bedroom, 1 bathroom art deco unit (on a busy road) sold on 4th May for $870,000 after 85 days on the market (above).
Buyers have a more reserved attitude and HTW is forecasting that this will continue for the remainder of the year. 
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j.ballantyne1990-6AQqhLzZaK

Cooling off occurring in Sydney's Eastern Suburbs residential market prices: HTW 

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CoreLogic's February Home Value Index was released today, and it's further bad reading for a majority of capital cities.
Seven of the eight capitals saw house prices slide over the month. The national median house price value slipped 0.9%.
It was only spared further declines by Hobart, the only capital not to see a price decrease. Their median house price jumped 0.9 percent in February to $489,000.
Perth and Darwin housing markets were the biggest hit over the month. They saw declines of 1.4% and 1.3%. 
Sydney and Melbourne continued their steep decline, with another 1.1% and 1.2% taken off their median house price values.
Sydney's median house price value now sits below $900,000, having seen the median value drop another $14,000 from January. Melbourne dropped $11,000 over the month.
Click here<a href="https://www.propertyobserver.com.au/images/2019/3/1/CoreLogic.jpg" target="_blank"> to enlarge</a>.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/3/1/CoreLogic.jpg" alt=""> Source: CoreLogic
Compared to this time last year, Sydney's median house price value is over $160,000 lower, while Melbourne's has dropped by $105,000.
Since the October 2017 peak Sydney is closer to $200,000 cheaper, and are now 11.5% down annually. Last month both capital city markets were <a href="https://www.urban.com.au/news/94772-melbourne-s-10-6-annual-house-price-slump-rivals-sydney-10-9" target="_blank">approaching 11% declines</a> (Melbourne 10.6%, Sydney 10.9%).
Click here <a href="https://www.propertyobserver.com.au/images/2019/3/1/CoreLogic3.jpg" target="_blank">to enlarge</a>.
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It's another decline above 1% for both the major capital city markets, the fourth straight month in a row.
Housing markets Adelaide, Canberra and Brisbane only saw small declines.
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jrobinson-rf4aSBido9

Perth and Darwin prices dip further, and Sydney sees 11.5 percent annual house decline

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Sydney and Melbourne both saw their median house prices fall in the month January as they both approach 11% annual declines, according to CoreLogic.
Sydney median house price went back a further 1.4% to be 10.9% down annually, while Melbourne's accelerated decline saw its median value drop another 1.7%, making it now 10.6% down annually and closing the gap on the harbour capital every month.
It's the third month in a row that the two capitals have seen declines over the one percent mark.
Click here <a href="https://www.propertyobserver.com.au/images/2019/2/1/CL-decline.jpg" target="_blank">to enlarge</a>.
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The median house price in Sydney now has slipped to $902,000, with Melbourne's at $740,000.
Only 12 months ago Sydney's stood at $1.058 million, and Melbourne's $832,000.
Dwelling prices in the two major property markets dropped 1.3% in Sydney and 1.6% in Melbourne, due to apartments now getting caught up in the downturn (Sydney -1.2%, Melbourne -1.3%).
Click here <a href="https://www.propertyobserver.com.au/images/2019/1/CL-Jan1.jpg" target="_blank">to enlarge</a>.
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Nationally, capital city dwelling values declined 1.2% over the month of January, led by Darwin (-1.7%), then Sydney and Melbourne.
There were losses over the one percent mark in Perth, while Brisbane and Adelaide record small loses.
The heat has even come out of the Hobart market. They saw a 0.2% decline. The median dwelling value in the Tasmanian capital is still 7.4% up annually.
CoreLogic's head of research Tim Lawless said the top quartile in Sydney and Melbourne are suffering the most.
Click here <a href="https://www.propertyobserver.com.au/images/2019/2/1/Dwelling-CL.jpg" target="_blank">to enlarge</a>.
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Weakness across the most expensive quarter of the market is most visible in Melbourne, where values across the top quartile are down 12.4% over the past twelve months and 13.8% lower since peaking.
Sydney’s top quartile of the market is showing a similar trend with values down 10.8% over the past twelve months and 14.6% lower since peaking.
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“The lower valuation brackets have benefitted from higher demand from first home buyers as well as tighter lending conditions for borrowers with higher debt to income ratios which is likely supporting a shift of demand towards lower price points," Lawless said. 
“Although the more affordable valuation brackets across Sydney and Melbourne have seen some resilience to falls early in the decline phase, it’s clear that all segments of the market in Australia’s two largest cities are losing value. 
“We’re seeing most of the large capital cities apart from Sydney and Melbourne showing far less divergence between the valuations brackets, which may be attributable to healthier levels of housing affordability and an absence of stimulus for first home buyers.” 
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Melbourne's 10.6% annual house price slump now rivals Sydney 10.9%: CoreLogic

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EXPERT OBSERVER
Home prices slid in 2018, in some places by quite a lot.
According to the widely-used <a href="https://www.corelogic.com.au/research/monthly-indices" target="_blank">Corelogic Hedonic Home Value Index</a>, home prices were down 4.8% across the nation in 2018. Sydney was particularly hard hit, down 8.9% and prices in Melbourne slipped 7.0%. Hobart was a bright spot, but an exception, up 8.7%.
You might be dying to ask what “hedonic” means. The word relates to pleasure, in this case the pleasure of owning a home.
<h2>Hedonic. It’s how we compare like with like</h2>
In earlier times monthly house price moves were calculated by comparing the average price of houses sold in one month with the average price of houses sold in the previous month.
But what if the “pleasure” that was sold in that month was different from the pleasure that was sold the previous month? What if, for example, in December mainly good five-bedroom mansions in good suburbs were sold, whereas in January it was mainly one bedroom dumps located where people didn’t want to live? The average recorded price would go down even if the price of individual houses had not.
The hedonic index gets around this by comparing <a href="https://www.corelogic.com.au/research/rp-data-corelogic-home-value-index-methodology" target="_blank">like with like</a> - the price of three-bedroom homes in a middle ranking suburb with the price of three-bedroom homes in the same middle ranking suburb and so on. It’s made up of a lot of indexes combined, and is unaffected by the mix of properties that happen to be sold in any particular month.
The results are not good news for current home owners, but they are worth putting into perspective.
<h2>How far back do you want to go?</h2>
In Melbourne prices are down 7.2% from their peak, but they are no lower than they were as recently as February 2017. In Sydney, prices are no lower than they were in August 2016 according to Corelogic.
So, should we focus on the latest very recent drop in prices, or the incredibly strong growth over the previous 20 years?
The following chart from Corelogic’s Head of Research Tim Lawless demonstrates that long-run growth in Sydney, as well as the fact there have been pretty significant short-run dips along the way.
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The most obvious point to make is that if you bought recently then the current price drops hurt. If you had a 20% deposit, the latest falls in Sydney and Melbourne have wiped out about half of your starting equity; more if you factor in stamp duty and moving costs.
If you bought a longer time ago, you might feel the sting of the latest price slide just a touch, but you are still well ahead.
So from a personal perspective, it’s natural that some people will care a lot about what’s happened, and others won’t much mind.
<h2>What’ll it mean for the economy?</h2>
The biggest concern is the so-called “wealth effect”.
When home prices fall, homeowners feel (and are) poorer.
It affects how much they are prepared to spend, although as the <a href="https://www.rba.gov.au/publications/rdp/2015/pdf/rdp2015-08.pdf" target="_blank">Reserve Bank and others have pointed out</a> the size of the effect remains unclear.
But it might be bigger than you think. Many of us aren’t rational. We have <a href="http://www.columbia.edu/%7Emd3405/RD_lecture_1_handout.pdf" target="_blank">“reference points”</a>. If, because of the barrage of media reports at the time, we use the start of 2018 (the top of the market) as our reference point, then even those of us who have owned properties for a long time will feel poorer. And because of that, we might spend less.
Since private spending <a href="https://tradingeconomics.com/australia/household-final-consumption-expenditure-etc-percent-of-gdp-wb-data" target="_blank">accounts for well over half of Australia’s gross domestic product</a>, spending less can have a big effect.
<h2>What’ll it mean for the banks?</h2>
Australia’s big four banks are the biggest lenders to residential property owners and are among the biggest companies in Australia.
Could the slide in property prices put them in jeopardy?
If a few homebuyers had a 20% deposit and suffered at most maybe a 15% fall in prices, there isn’t a problem, right?
That view is basically correct – except when it’s not.
Some lenders have been bulking up loans to borrowers who earlier took out, say, A$600,000. When their homes came to be worth, say, $1.5 million they lent them more - boosting their loans by most of the extra value.
The practice calls into question the view that only a small number of the most recent buyers are highly leveraged. Many more folks could be – but without the loan-level data that the banks have, we don’t know.
<h2>Is 2018 a good predictor of 2019?</h2>
At the heart of all of these questions is whether the 2018 price falls are likely to continue, which would mean them getting much bigger.
That depends on what caused them.
A key part of it was that banks (at least the big four) lent less than they used to. With less money borrowed, there was less money to bid up prices.
As I have noted before, Australian banks were arguably lending too much; about 25% more than US banks to equivalent borrowers.
Post Royal Commission, that’s changed. As has been widely discussed, banks are now looking at borrower’s expenses much more carefully. Too carefully, according to Treasurer Josh Frydenberg who has <a href="https://www.afr.com/news/politics/josh-frydenberg-tells-banks-to-ease-up-on-lending-crackdown-20181109-h17q2g" target="_blank">called on them to lend more</a>.
The important point is that if there has been a one-off adjustment in the borrowing capacity of Australians, then the price falls should stop fairly soon: predictions of more modest falls in 2019 followed by a reset and uptick in 2020 mightn’t be too far off the mark.
If so, the short-term slide will remain for most people, just that.
<a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">Richard Holden</a>, Professor of Economics, <a href="http://theconversation.com/institutions/unsw-1414" target="_blank">UNSW</a>
This article is republished from <a href="http://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/vital-signs-so-far-its-more-of-a-house-price-blip-than-a-bust-in-the-making-109568" target="_blank">original article</a>.
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It’s more of a house price blip than a bust in the making: Richard Holden

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Darwin just pipped Canberra to be 2018's strongest mainland capital city with 3.7 percent house price growth, according to CoreLogic.
Canberra houses rose 3.6 percent in the year.
Darwin's house price recovery was not however seen in the apartment market, where it was the weakest capital city market across the country.
Darwin unit prices were down 10.4 percent during 2018 to a $305,000 median, the CoreLogic report showed.
Canberra unit values rose 2 percent to $440,800.
Click here <a href="https://www.propertyobserver.com.au/images/2019/1/2/dwell1.jpg" target="_blank">to enlarge</a>.
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Darwin's dwelling values over the calendar year fell by 1.5 percent, while Canberra's dwelling values rose 3.3 percent.
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According to CoreLogic head of research Tim Lawless, the broad weakening in housing market conditions in 2018 highlights that the slowdown goes well beyond the correction in Sydney and Melbourne.
“Although Australia’s two largest cities are the primary drivers for the weaker national reading, most regions around the country have reacted to tighter credit conditions by recording weaker housing market results relative to 2017.
“The two exceptions were regional Tasmania, where the pace of capital gains was higher relative to 2017 resulting in a nation leading 9.9 percent gain in values over the 2018 calendar year, and Darwin, where the annual rate of decline improved from -8.9 percent in 2017 to -1.5 percent in 2018.”
A recent sale in Nightcliff was a Verbena Street five bedroom house which has been sold at $800,000 (pictured below).
<a href="https://www.realestate.com.au/sold/property-house-nt-nightcliff-128726138" target="_blank">13B Verbena Street </a>features open plan living/dining area, large covered balcony, kitchen with steel oven, four upstairs bedrooms and fifth bedroom downstairs. 
Other features include tropical gardens, in-ground pool, double carport and split-system a/c.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/8/14/nightcliff%20.jpg" alt="">
A Fannie Bay three bedroom townhouse has been recently sold for $850,000 (pictured below).
Situated at 2/3 Philip Street, the townhouse comes with open plan kitchen and living, three bedrooms, and large private courtyard with in ground pool. 
It is with walking distance to the Fannie Bay Shopping Village and parks as well as East Point Reserve.
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Darwin was one of only two capital cities that saw a reduction in gross rental yields over the year. 
Darwin showed a reduction in rental yields, due to rental rates (-5.8 percent) falling more than dwelling values (-1.5 percent).
Hobart dwelling values (+8.7 percent) rose faster than rents (+5.8 percent) which dragged the gross yield lower over the year. 
Housing affordability has rapidly deteriorated across Hobart, according to Lawless.
"Outside of Hobart, where dwelling values were 8.7% higher over the year, even the best performing regions returned a relatively mild annual growth rate, Lawless said.
Seven of the top ten sub-regions returned an annual gain of less than 3%.
"Such a soft result amongst the best performing areas highlights that housing market weakness is broad-based and not just confined to Sydney and Melbourne," Lawless added.
Click here <a href="https://www.propertyobserver.com.au/images/2019/1/2/Cl-Jan2full.jpg" target="_blank">to enlarge</a>.
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Darwin pips Canberra to be 2018's strongest mainland capital for house value growth: CoreLogic

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Melbourne's house value decline accelerated to 9.1 percent in late 2018, according to CoreLogic.
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Melbourne’s top quartile housing market led the way with dwelling values down 11.2 percent over the year, while the lower quartile of the market has remained in subtle growth territory over the year (+0.5%).
Melbourne values are down 7.2% since peaking in November 2017. 
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At the end of 2018, Melbourne values are back to February 2017 levels, Tim Lawless, the head of research at CoreLogic said.
The 7.2 percent Melbourne decline from its peak 13 months ago compares with Sydney's 6.9 percent dip when it was 13 months into its downturn.
Click here <a href="https://www.propertyobserver.com.au/images/2019/1/2/dwell1.jpg" target="_blank">to enlarge</a>.
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Melbourne's inner east was the nation's worst performing housing market in 2018, according to CoreLogic.
The region saw declines of 13.4 percent.
The worst performing list, dominated by Sydney suburbs, only had one other Melbourne suburb, the inner south, which saw 10.5 percent decline.
Click here <a href="https://www.propertyobserver.com.au/images/2019/1/2/Ryde4.jpg" target="_blank">to enlarge</a>.
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Melbourne's inner east comprising of the likes of Doncaster, Hawthorn, Surrey Hills and Park Orchards.
Click here <a href="https://www.propertyobserver.com.au/images/2019/1/2/Cl-Jan2full.jpg" target="_blank">to enlarge</a>.
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This time last year, at the end of 2017 Tim Lawless noted that the 2017 shift to falling national dwelling values was being driven by the capital cities, with the combined capitals tracking half a percent lower over the December quarter, while across the combined regional areas of Australia, values were half a percent higher over the quarter.
Amongst the capitals, the weakest end of 2017 year conditions were concentrated in Sydney and Darwin.
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At December 31, 2017 Sydney dwelling values remained 70.8 percent higher than their cyclical low point in February 2012.
The best performing capital city over the 2017 calendar year was Hobart, where dwelling values rose by 12.3 percent: almost five times higher than Hobart’s decade average annual rate of capital gain (2.5 percent).
 
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Melbourne's inner east the nation's weakest house price market in 2018: CoreLogic

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The Ryde district ranked as Sydney's weakest 2018 housing market, according to CoreLogic.
Ryde values were down by 13.3 percent over the year to December 31.
Sydney's inner south west was the next weakest with values down 10.9 percent.
Melbourne's inner east was the worst performing area of 2018, seeing <a href="https://www.urban.com.au/expert-insights/buying/93724-melbourne-s-inner-east-the-nation-s-weakest-house-price-market-in-2018-corelogic" target="_blank">declines of 13.4 percent</a>.
There was a late year deterioration in values as Ryde's decline was put at 9.4 percent in August (below).
Recent Ryde sales included a one-bedroom apartment at 4 Devlin Street (above), which sold for $565,000, some $115,000 less than its 2014 off the plan purchase price.
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Ryde district vendors were having to adjust their expectations with losses emerging for some.</div>
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<div>Another off the plan purchase in Ryde went backwards recently. </div>
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<div>The apartment was bought for $713,000. The Belmore Street two bedroom apartment recently sold for $691,000.</div>
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<div>A two bedroom Macquarie Park apartment recently sold for $808,000, just $8,000 more than than two years ago. The sale fell well short of its initial $870,000 guide, and would have meant a loss after costs including stamp duty and estate agent commission.</div>
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<div>A four bedroom house in Marsfield recently went backwards on its 2015 price. The 1975 built home sold for $1,791,000 in three years ago, and has just resold for $1.75 million, a $41,000 loss.</div>
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A unit at 21-31 Porter Street fetched $66,000 less, while a unit at 2D Porter Street sold for $38,000 less than four years ago.
<a href="https://www.propertyobserver.com.au/images/2019/1/2/Ryde4.jpg" target="_blank">Click here</a> to enlarge:
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A three bedroom house in Ryde sold for $1.65 million (pictured below) bucked the trend selling in under three weeks.
Set on a 550sqm block, the house at<a href="https://www.realestate.com.au/sold/property-house-nsw-ryde-129030918" target="_blank"> 1 Cosimo Place</a> offered three large bedrooms, modern Caesarstone kitchen, formal living and second living area.
Other features include LED-lit stairs, alfresco, generous laundry and study nook. 
It sits a short stroll to buses and parklands, and delivers immediate access to schools, retails and Macquarie business precinct. 
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A one bedroom unit in the heart of Ryde sold for $430,000 (pictured below). It first sold at $281,000 in 2012.
The unit situated at<a href="https://www.realestate.com.au/sold/property-apartment-nsw-ryde-128796734" target="_blank"> 1/688 Victoria Rd</a> consists of one bedroom with built-in, spacious lounge/dining area, modern kitchen and private courtyard.
It is situated only a short walk away from Top Ryde Shopping Centre, Putney Shopping Village, Local Transport, Schools and Riverside Parklands.
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A Curzon Street two-bedroom unit priced between $580,000 to $630,000 (pictured below) fetched $568,000 in October.
The unit at <a href="https://www.realestate.com.au/property-unit-nsw-ryde-129234978" target="_blank">7/15 Curzon Street</a> comprises of large living area with balcony, newly renovated kitchen, two large bedrooms and lock-up storage room.
It situated within seconds to Top Ryde City Shopping Centre, city buses, restaurants and cafes.
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Ryde ranks as Sydney's weakest 2018 housing market: CoreLogic

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National dwelling prices will have declined by five percent by the end of the year, CoreLogic have estimated in their 2019 market outlook.
They still say national dwelling values will be 22 percent higher relative to this time five years ago.
Through to the end of November, Sydney was the hardest hit, with dwelling values dropping 8.1 percent, while Hobart performed the best, seeing a 9.3 percent rise.
CoreLogic's head of research Tim Lawless said there is likely to be only three capital cities bringing down the national dwelling total.
“In all likelihood, five of Australia’s capital cities will finish the year with a positive annual movement in dwelling values, highlighting that weaker conditions in Sydney and Melbourne, and to a lesser extent, Perth, are the main drag on the national index," Lawless said.
"To assess the housing market trends over the coming year, it’s important to reflect on the factors that have driven the market performance more recently and how they are likely to change over the coming twelve months.”
He suggests the lack of credit availability is a key factor in the current housing market downturn, and expects lenders to remain conservative in 2019.
"With the final report from the Royal Commission due in early 2019, we expect lenders will remain conservative in their approach," Lawless advised.
"This implies that high quality borrowers will be in the driver’s seat (i.e those with large deposits, low debt relative to their income and a strong serviceability position).
"Borrowers with less than a 20% deposit and those with debt levels that exceed six times their income will find it harder to obtain finance and will likely face a premium on their mortgage rates.
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"Overall, we expect housing finance will remain a formidable obstacle to improving housing market conditions next year, but higher quality borrowers should be able to secure debt at very low rates as lenders compete for their business. 
 
 
 
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CoreLogic tip 2018 national dwelling values to end five percent down

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National capital city residential property prices fell 1.5 per cent in the September quarter 2018, according to figures released by the ABS, and 1.9 per cent over the year.
Melbourne and Sydney were the obvious drivers of the decline.
Melbourne prices recorded the third consecutive quarter of falls (-2.6 per cent) and the first annual price fall (-1.5 per cent) since the September quarter 2012.
Sydney property prices continued to fall, a further -1.9 per cent in the September quarter. 
Bruce Hockman, chief economist at the ABS falls in Sydney and Melbourne are no longer confined to the more expensive properties.
"Declines are now being observed in the middle and lower segments of the market," Hockman said.
"Factors including tightening credit availability and falling property prices are weighing on activity from both investors and owner occupiers".   "Results are in line with market indicators, with auction clearance rates and sales volumes falling and days on market trending higher," Hockman added.
Click here <a href="https://www.propertyobserver.com.au/images/2018/12/11/ABS-Figures.jpg" target="_blank">to enlarge.</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/12/11/ABS-Figures.jpg" alt=""> Source: ABS
The total value of Australia's 10.1 million residential dwellings fell by $70.1 billion to $6.8 trillion. The mean price of dwellings in Australia is now $675,000. 
Ernst &amp; Young Sydney managing partner Andrew Price said the latest data is more evidence of a significant downturn in Sydney and Melbourne.
"Access to credit and macro-prudential measures are proving to be major factors in the downturn," Price suggested.
"Unlike previous downturns, it’s occurring during a period of low unemployment and strong economic conditions, which suggests that regulatory settings are playing a major role.
"The downturn coincides with the introduction of comprehensive credit reporting, which will only add further lending requirements."
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Sydney and Melbourne drive property price decline in September quarter: ABS

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The cooling of the property market was expected, but the price falls have been larger than previously forecast, according to HSBC's Paul Bloxham.
He suggests the cooling has been due to a reversal of factors that drove the boom in the first place. 
These included: housing undersupply during the mining boom (2004-2012), which has been worked down by a building boom; falling interest rates, that have since stabilised; strong foreign demand, which has weakened, due to constraints on foreign buyers; strong growth in lending to investors, which has been constrained by tighter prudential settings; and, expectations of capital gains, which drove investor activity, but have eased. 
Bloxham noted the cooling is not unlike developments elsewhere, such as in London, New York and Vancouver, suggesting some common global factors.
"So far, the cooling has been orderly, with very few forced sales. 
"This partly reflects that the key fundamentals that support housing demand remain in place − strong population and jobs growth and low interest rates. 
"In addition, although housing supply has been boosted, the market does not appear to be oversupplied. 
"Our central case is for a soft landing, supported by these fundamentals.
"A harder landing is a risk and could occur if economic growth were to slow sharply and the unemployment rate rose.
"High household debt also makes Australia’s economy more vulnerable. 
"A further credit tightening, perhaps as the result of policy changes resulting from the Royal Commission, is a risk.
"Possible changes to the tax treatment of investment properties present a risk, but we see the likely effect as small."
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While the housing market correction remains orderly and jobs growth remains solid, Bloxham expects it to have a limited impact on consumption growth/
"There was little evidence of a positive wealth effect during the boom, and consumer spending has held up well recently, despite the housing market cooling.
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National housing prices rose by 46% from the trough in mid-2012 to the peak in mid-2017, which delivered a compounded annual growth rate of 8% over that period (Chart 1). Since mid- 2017, nation-wide housing prices have fallen by 5% (peak-to-current level).
However, the nation-wide average hides considerable variation across the country (Chart 2). 
He noted much of the ramp-up was in the Sydney and Melbourne markets, where prices rose by 75% and 58%, trough-to-peak, respectively. Over the same period, housing prices rose by smaller amounts in Adelaide (20%), Brisbane (20%), Canberra (22%) and Hobart (40%). In Perth, where the end of the mining boom had its largest effect, housing prices rose in 2012 and 2013, but then fell, to now be lower than in 2012 (Perth prices are the same as they were in 2009).
National housing prices began to fall in mid-to-late 2017, and since their peaks, Sydney and Melbourne prices are down 8% and 5%, respectively. Prices have continued to rise in the other cities, except for Perth. So far the cooling has orderly, "with little evidence of forced selling."
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<img src="https://www.urban.com.au/images/2018/11/22/HSBC%20GRAPH%203.JPG" alt="">
For Sydney, the rise and fall in prices occurred to similar degrees for both houses and apartments and prices rose by similar amounts across the price distribution.
So far, the price declines have been more pronounced at the top end of the market, although prices at the bottom end are also falling.
<img src="https://www.urban.com.au/images/2018/11/22/HSBC%20GRAPH%204.JPG" alt="">
For Melbourne, the trends are similar, although apartment prices rose by far less than detached house prices, due to a strong boost to apartment supply in recent years.
The differential between house and apartment price trends in Melbourne provides evidence that the supply and demand of dwellings (not just availability of finance and interest rates) have been key drivers of the price trends.
A large boost to Melbourne apartment supply ensured that unit prices rose by less than detached house prices.
<img src="https://www.urban.com.au/images/2018/11/22/HSBC%20GRAPH%205.JPG" alt="">
During the housing price boom, Sydney and Melbourne were favoured over the other cities for a number of reasons.
They had much less exposure to the drag in incomes from the end of the mining boom and, as a result, had much stronger jobs and population growth
Both markets were more undersupplied, as housing construction had been weak during the mining boom; and, they are Australia's most global cities, so they attracted the most foreign investment and migrants.
Many of these forces are now acting as a drag on housing prices in Sydney and Melbourne.
<img src="https://www.urban.com.au/images/2018/11/22/HSBC%20GRAPH%206.JPG" alt="">
The rise in housing prices since 2012 has been much more gradual outside of Sydney and Melbourne.
In Brisbane, housing prices have risen by 20% since the trough in 2012, with a significant differential between detached house and apartment prices, reflecting the effect of an apartment building boom in the central business district in recent years.
In Perth, housing prices rose in 2013 and 2014, as the fall in interest rates supported activity, but the combination of a sharp slowing in population growth at the end of the mining boom, and a boost to housing supply, has seen prices falling since then.
For the other smaller cities, prices have generally risen, given less exposure to the end of the mining boom and support from lower interest rates, among other region-specific factors.
<img src="https://www.urban.com.au/images/2018/11/22/HSBC%20GRAPH%207.JPG" alt="">
Bloxham noted what has been unusual about the recent housing market cooling, compared with history, has been that it has occurred without the RBA lifting its cash rate, or a significant rise in mortgage rates.
"Instead, housing supply has increased to meet demand, and help clear the market, and a range of other factors (outside of the RBA’s cash rate setting) have helped to constrain demand, including constraints on foreign purchases and tightened prudential settings.
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"Because the housing market is cooling while economic growth is strong and the labour market is tightening, the cooling has, so far, been orderly. There are few signs of forced sales, aside from pockets of the ‘off-the-plan’ apartment market," he said.
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