Home prices fall at double previous rate in Sydney amid weaker economy

Buyers at a recent auction in Cremorne. Picture: Tim Hunter.

Home prices in Sydney have been falling faster as the economic fallout from coronavirus deepens.

Property values fell in June by double the rate they did over May, with the median home price down 0.8 per cent, CoreLogic’s hedonic home value index revealed.

The median price of a freestanding house was $1.01 million, 0.9 per cent lower than at the start of June, while the median unit price was $761,000, 0.6 per cent lower.

Regions COVID-19 has hit hardest

Auctions attract bids of up to $6m

CoreLogic head of research Tim Lawless said the June fall was “mild” but the market was looking increasingly vulnerable.

Much would hinge on when the federal government rolled back stimulus such as JobKeeper, he said.

CoreLogic research director Tim Lawless.

The stimulus, along with record low interest rates and bank support for struggling mortgagees, prevented mass distressed sales that would otherwise have sent prices plummeting, Mr Lawless said.

“It’s encouraging to see lenders have recently hinted at an extension in their repayment leniency policies (but) government stimulus will eventually taper and banks will require borrowers to repay their loans,” he said.

“The longer term outlook for the housing market is largely dependent on how well the economy is tracking when these support measures are removed.”

Property analyst Eliza Owen said declines in prices were accelerating because of recent job losses. Lower migration rates were also dragging down rents and some landlords would be reaching the point where they would need to sell, she said.

“By historical standards, it’s a mild downturn but we can expect further declines in prices until the labour force recovers and more of the economy opens up,” Ms Owen said.

The 0.4 per cent average fall in values over May was the first time Sydney home prices had dropped in close to a year.

Home values inched up 0.4 per cent during the height of lockdown measures in April and there was also an increase in values over March.

Prices at the most expensive end of the market fell faster.

The market had been surging before the pandemic hit and prices remain 13.3 per cent higher than a year ago.

“A variety of factors have helped to protect home values from more significant declines, including persistently low advertised stock levels,” Mr Lawless said.

“Additionally, low interest rates and forbearance policies from lenders have helped to keep urgent sales off the market, providing further insulation to housing values.”

The weaker economy during COVID-19 had a bigger impact on the upper-end of the market, according to CoreLogic.

More from news

The median price of a house is now $1.01 million.

Home values in the priciest quarter of the market fell the sharpest over the month, with a drop of 1.3 per cent. Values in the cheapest quarter of the market increased 0.2 per cent.

“Higher value markets tend to be more reactive to changes in the environment, having led both the upswing and the downturn over previous cycles,” Mr Lawless said.

The upper quartile recorded the most significant run-up in values throughout the second half of last year.

Realestate.com.au director of economic research Cameron Kusher said record low interest rates made the housing market more resilient to the economic impact of coronavirus than many other sectors.

Auctioneer Max Wylie at a recent Ryde auction. The area has been one of the more resilient Sydney markets. Picture: Gaye Gerard

Areas like Parramatta have been more affected by lower migration.

Lower rates have historically boosted demand for property and this rule of thumb still applied in current conditions, despite looming increases in unemployment.

“If you look at who has been adversely affected, it has predominantly been groups who are not traditionally active in the housing market such as under 30s,” Mr Kusher said

“There are still plenty of people with steady employment … some buyers are (capitalising) on the low rates.”