Consumers concerned about 'significant' housing correction

by AB06 Nov 2015
More than two thirds of Australians are concerned that Australia's housing market is vulnerable to a significant correction in values, a new survey has revealed.

According to the CoreLogic RP Data - TEG Rewards Housing Sentiment Survey, 68% of respondents indicated they believed Australia’s housing market is vulnerable to a significant correction in values.

However, the findings are a reduction from the previous quarter results where 75% of respondents indicated they were concerned about a significant downturn. 

CoreLogic RP Data head of research Tim Lawless said it isn’t unlikely.

“While we don't envisage dwelling values will fall substantially, the probability of declines in Sydney, and to a lesser extent in Melbourne, after such a strong run of capital gains isn't unlikely.

“Home values are already trending lower in Darwin and Perth. It was less than three and a half years ago that capital city dwelling values fell by 7.4% between October 2010 and May 2012.”

Additionally, 95% of survey respondents believe that foreign demand is pushing dwelling values higher, with nearly one in five (19%) respondents indicating that foreign buyers were responsible for placing ‘extreme’ upwards pressure on home values. Only 5% of survey respondents thought foreign buying activity wasn't pushing home values higher. 

According to Lawless, the results are a reminder that the true extent of foreign buying of residential properties across Australia continues to lack transparency, despite the House Economics Committee Report on Foreign Investment in Residential Real Estate being handed down almost a year ago.  

“The latest statistics from the Foreign Investment Review Board haven't been updated since the 2013/14 financial year,” he said.

Just over half (55%) of survey respondents thought that the current housing market conditions represented a good time to buy a property, down from 60% in June.  Respondents based in Sydney, where housing market conditions have been running the hottest, were the most pessimistic about buying conditions, however 29.7% of respondents still thought that now was a good time to be getting into the market.  

Alternatively, more than 70% of survey respondents thought buying conditions were ripe in the Australian Capital Territory, Adelaide, regional Queensland and Perth. 

The proportion of survey respondents who thought dwelling values will rise over the coming six months has been trending lower, with respondents who thought home values will rise over the next six months dropping from 49% in March and 48% in June to just 40% of all respondents in September.
 

COMMENTS

  • by Alex Sapounas 8/11/2015 1:33:38 AM

    No one has a crystal ball all we can do is assess what is happening and what is transpiring internationally and domestically to see through the haze. The market in Australia is finely balanced. The amount of debt carried by governments and individuals are at their historical highest. The problem will be the timing and degree of price retraction in financial and property markets. Most governments will continue expansionary policies as they have no solutions to increase growth or political will over the last twenty years to temper the financial expansion. My belief is quality property with land content near diverse drivers of economic activity and lifestyle will hold their own. But for poorer quality properties, or lack scarcity value such as mass produced units off the plan, if the market psychology and a swan event join together hold onto your hats. Unfortunately, people do not know what to do with their money at the moment most financial and real assets have taken off in price since the GFC created by even looser monetary policy not seen since the Great Depression. Australia is a great place but we cannot hide from the rest of the world.

    I will break my forecasts into four categories: Optimistic, Neutral, Pessimistic, Concerned.

    Optimistic view: Governments worldwide continue easy money and no loss of confidence in economic growth. Prices to grow above inflation for next few years. Probability 20%.

    Neutral view:
    Easy money continues with some economic rumbles and property prices stay flat or plateau for the next few years.
    Probability 40%.

    Pessimistic view:

    Sydney and Melbourne will be down 20 percent in real terms over the next five years taking into account the positives and negatives for our economy, local conditions and world events. This would be a soft landing rather than a hard landing.

    The reasons we may have a softer landing is the record infrastructure spending occurring in the Eastern boards main states. Sydney is now viewed internationally as a global city, low Australian dollar making our assets looking more attractive internationally, movement of workers from mining states to Sydney And Melbourne seeking employment thus creating demand for accommodation.

    Probability: 30%

    Concerned view:

    However, it could be a lot worse if United States of America cannot continue selling their debt, loss of global confidence in the US Dollar, shift of oil pricing from US dollars to other currencies, the potential loss of US money hegemony by other nations i.e BRICs creating their own currency. Other negative factors could be buyers US debt dump it back into the US market, Commodity prices spike, a credit collapse occurred, interest rates rise, EU countries default on their debt, the worlds largest nations introduce tariffs thus diminishing trade, loss of confidence in paper money leading to deflation or hyperinflation. Increased conflict by major powers in middle east asserting their diminishing power.