A leading property expert has weighed in on the predicted housing market downturn, stating that rising interest rates are the primary driver, not recent budget changes. Tim Lawless, research director at Cotality, says homeowners in Brisbane, Perth, and Adelaide who have seen property values surge by over 80 per cent in the last five years will remain well ahead even if prices dip.
Swings and Roundabouts: Homeowners Still Ahead
Despite predictions of a major correction, Mr Lawless cautions that the data must be viewed in historical context. While Morgan Stanley forecasts a 9 per cent drop, which could wipe six-figure sums off Sydney and Brisbane properties, recent growth has been extraordinary. For instance, house prices in some Perth suburbs soared 30 per cent in a single year, and parts of Brisbane saw 25 per cent growth.
Mr Lawless noted that Australia has experienced mild and infrequent housing downturns over the past 40 years. The last downturn, from 2022 to 2023, saw combined capital values fall by 8.1 per cent over 10 months as interest rates rose from pandemic lows. Prior to that, the 2017-19 downturn saw Sydney values drop by 13 per cent and Melbourne by 10 per cent, while Perth fell over 15 per cent post-mining boom.
Interest Rates the Biggest Driver
Asked about the impact of changes to negative gearing and capital gains tax, Mr Lawless said interest rates are more meaningful. "If I put my finger in the air, I would say that interest rates are probably more meaningful to the housing outcomes, alongside things like serviceability," he said. He added that investors currently account for about 40 per cent of mortgage demand, a high watermark, and predicted they would pull back sharply given low rental yields.
Good or Bad? Depends on Perspective
Mr Lawless said the budget changes could be viewed differently depending on one's position. "If you're a first home buyer, I think you'd be very happy about housing prices coming down," he said. "If you're an investor, your strategy has been majorly disrupted. If you're a homeowner, about 55 per cent of Australian wealth is in residential housing, so most would prefer prices to go up." However, he acknowledged the dilemma: "I'm a homeowner with young kids, and I wonder how they'll get into the marketplace without prices becoming more affordable. So, is a downturn really all that bad? It's probably swings and roundabouts."
Treasurer Denies Cheering House Price Falls
Treasurer Jim Chalmers has faced pointed questioning over his comments on the housing market. He denied suggesting it was "a good thing" that house prices are falling, after saying it was "a good thing" if first home buyers get a fair crack at auctions. In a fiery interview with the Today show's Sarah Abo, Dr Chalmers insisted he did not say house price drops were good. "I said that it's a good thing if first home buyers are getting a crack at auctions. I was asked about clearance rates," he said.
Dr Chalmers argued that the budget changes aim to give first home buyers a fair go, and that multiple factors are impacting prices, including interest rate hikes and softer economic conditions. He accused the Coalition of running scare campaigns over housing market fluctuations.
House Price Predictions
Analysts at Morgan Stanley predict a 5 to 10 per cent fall in house prices over the next year. That follows 19 per cent growth in Brisbane, 12 per cent in Adelaide, and 25 per cent in Perth last year. A 9 per cent drop could mean a $100,000 reduction in Sydney home values, though falls would not be uniform. Mr Lawless said predictions that the drop would be equivalent to the last year of growth seemed "about right."
The Treasurer defended the government's 5 per cent deposit scheme, arguing that housing is a long-term investment. "Overwhelmingly, what that policy is about is making things fairer for first home buyers," he said. He expressed confidence that the government had made "the right decisions for the right reasons," despite scare campaigns.
Read related topics: Adelaide, Brisbane, Perth
