In his analysis of the change in market conditions through 2018, CoreLogic research analyst Cameron Kusher noted that housing market activity has been “slowing quite rapidly” and is likely to continue in 2019.
CoreLogic noted that over the 12 months to November 2018, national dwelling values dropped by 4.1 per cent, the largest annual fall since December 2011, with capital city declines driving the downward trend, particularly in Sydney and Melbourne, where values have fallen by 8.1 per cent and 5.8 per cent, respectively.
Mr Kusher claimed that unlike previous housing market slowdowns, which it said were typically driven by an economic slowdown, or higher mortgage rates, the latest slump has been “manufactured via tighter credit conditions”, despite the economy continuing to grow and mortgage rates sit at “near record low levels”.
“Since the onset of financial deregulation in the mid-1980s, credit access at the time became a whole lot easier for borrowers,” he said.
“However, since macro-prudential policies implementation began in 2015, accessing credit has become incrementally more difficult and where investors and interest-only borrowers are having to pay higher mortgage rates.”
Further, Mr Kusher expects “more of the same” continue in 2019, particularly in Sydney and Melbourne, adding that regulation off the back of the financial services royal commission’s final report could contribute to the weakness.
“2019 credit conditions are expected to remain tight – a likely catalyst towards dampening housing market conditions,” he continued.
“February will see the release of the banking royal commission findings and recommendations and will potentially deliver significant changes for the mortgage landscape.”
The CoreLogic analyst also expects a change in the focus of the Reserve Bank of Australia if housing market weakness seeps into consumer sentiment.
“Were this to happen, we could see some of the temporary macro-prudential measures eased back throughout 2019,” he concluded.
[Related: Drop in house prices sharpest since GFC]
Charbel Kadib is the news editor on the mortgages titles at Momentum Media.
Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.