Sydney’s property market is not looking good for sellers at the end of this year with more listings, dwindling prices and worsening auction slumps.
SQM Research revealed that total residential listings increased by 7.5 percent over November, pushing the total number of homes for sale Sydney to 40,000, the highest number recorded since 2009. Current listing levels are 20.9 percent higher than from last year.
Dwelling values in Sydney also fell 1.4 percent in the same month from October, bringing the prices down 8.1 percent over the past year to a median of $821,438, according to CoreLogic’s Home Value Index.
“Since peaking in July last year, Sydney’s housing market is down 9.5 per cent which is on track to eclipse the previous record peak-to-trough decline set during the last recession when values fell 9.6 per cent between 1989 and 1991,” CoreLogic head of research Tim Lawless told the Sydney Morning Herald.
In the first weekend of December, Sydney recorded an auction clearance rate of 41.4 percent with chances of sinking into the 30s over the month. SQM’s Louis Christopher said the last time Sydney fell into the 30s was in October-November 2008 during the Great Financial Crisis. The weekend turnover totalled $129 million in sales, well below the near $600 million in the same period a year prior, Domain reported.
Lawless said this downturn was driven by multiple factors, including tighter conditions for investment, housing affordability constraints and a general oversupply.
“We expect headwinds for tighter credit will continue for the foreseeable future and will continue to temper housing market activity,” said Lawless. “This will be especially the case for those markets where investment demand is most concentrated, and where housing costs are high relative to incomes, such as Sydney and Melbourne.”
House prices slid in many of Australian state capitals in the end of April.
According to property data agency CoreLogic, Melbourne had the steepest weekly decline with 0.2 per cent, followed by Sydney and Brisbane with 0.1 per cent. So far in 2018, the home prices in all five mainland state capital cities have fallen, ranging from Brisbane’s 0.1 per cent to Sydney’s 2.1 per cent.
Many factors could be attributed to these drops, including the higher-than-usual supply of properties. Currently there are 26,879 homes for sale Sydney and 31,195 in Melbourne, indicating a 28.2 per cent and a 11.4 per cent increase from this time last year respectively. Weak household income growth and a decline in the number of foreign buyers also contributed to this weakness.
Excluding richer property investors from negative gearing can help improve housing affordability, according to a report coming out today.
In a research released today, the Australian Housing & Urban Research Institute (AHURI) said negative gearing reforms that prioritise ordinary “mum and dad investors” could save the federal government $1.7 billion.
A proposed model suggests denying the top quarter of income earners any deductions from rental losses, while the bottom half could continue receiving 100 per cent deductions.
The researchers also propose a reduction of capital gains tax discount to limit negative gearing activities and reduce inequities between higher and lower income investors.
Another option the report models is capping negative gearing deductions to up to $40,000.
“Current negative gearing policies are heavily skewed towards high-income earners, raising concerns about the extent to which these policies exacerbate income and wealth inequality in Australia,” said Alan Duncan, Curtin University economics professor and co-writer of the report.
The negative gearing tax breaks policy has been blamed for the surge in housing prices in Sydney, Melbourne and Brisbane. The Labor party has advocated for limitation of negative gearing to only new properties and reduction of CGT discount to 25 per cent, but the Turnbull government said the opposition’s proposals would jeopardise the property market.
The report follows Grattan Institute’s review released on Sunday, which found that housing affordability can be improved by cutting CGT discount, getting rid of negative gearing, and building extra 50,000 homes per year.