Turning point' for housing market as property prices hit three-year low'

Australia's property market has entered a downturn after both house and unit prices fell for the first time in more than three years, bringing an end to the recent housing boom. House prices in the combined capital cities have fallen for the first time in more than three years. ( ABC News: John Gunn ) Australia's housing market has entered a downturn after house and unit prices fell for the first time in more than three years.

The downturn is most evident in unit prices, with all capital cities recording a fall except for Darwin. Despite declining prices, economists say it is unlikely to be a catalyst for a correction or crash in the property market. Australia's housing boom has officially entered a downturn for the first time in more than three years, with property prices falling from record highs in the June quarter.

The figures, released by online real estate company Domain, show that national capital city house prices fell by 1.4 per cent in the June quarter, while national unit prices dropped by 1.2 per cent. While annual growth remains positive for both houses and units nationally, it has slowed to its lowest level in nine months. The report noted that the change represented a "decisive shift in market conditions" due to higher interest rates, affordability constraints and waning confidence amongst buyers, while listings are increasing and homes are taking longer to sell.

Domain's chief of research and economics, Nicola Powell, said it marked a turning point for the nation's housing market. "After three years of uninterrupted price growth we've got house and unit prices declining over the quarter, so that does indicate that we are now in a downturn, she told The Business. But not every capital city saw a decline in house prices, with Adelaide the only city where prices accelerated in the June quarter.

Despite the downturn, house prices remained at record highs in the South Australian capital, as well as Brisbane, Perth and Hobart. "It was a bit of a mixed outcome depending on the capital city; we're seeing declines in Sydney, Melbourne and Canberra, that's really leading the downturn, Dr Powell said. However, Dr Powell said the downturn trend was most evident in unit prices, where all capital cities except for Darwin recorded a fall.

"That was a surprise to us, and I think that really shows that investors have become nervous; they are shying away from the housing market, but it may be having a ripple effect on first home buyers as well, she said. "I think there would absolutely be nervousness out there amongst first home buyers, that cautious approach, but I also think that behavioural response from first home buyers, thinking if they wait a little bit longer and prices pull back even further, they may get actually more for their money. Before the publication of the Domain data, property economist Cameron Kusher said he expected national dwelling values to decline.

"I think this downturn is set to be one of the largest we've seen in many years … [and] will turn out to be larger than the 7.5 per cent downturn seen a few years back, he wrote on Wednesday. "We have a somewhat perfect storm of low affordability, low sentiment toward housing, a weakening economy with productivity growth terrible, reduced incentives to invest in housing, relatively high interest rates and high inflation that looks set to continue for some time. Unit prices declined in every capital city except Darwin in the three months to June.

( ABC News: Declan Bowring ) Mr Kusher, who stressed that his views were independent of his employer, said it was unlikely the falls would translate to housing affordability. "With these declines in housing values, they won't improve affordability greatly because I expect that interest rates won't be reduced for some time and because dwelling values have increased by so much and so quickly over recent years, he said. "Historically, downturns in the national housing market have been fairly short-lived, and the recovery has been driven by interest rate reductions and/or significant market stimulus, typically to first home buyers.

"The decline in values I am anticipating is likely to result in weaker household consumption, higher unemployment and eventually lower inflation, but that is all likely to take time. "Whilst housing value declines are always framed as negative, they create opportunities too. Lower housing values afford new purchasers an opportunity to enter the market, they improve housing affordability, and they provide opportunities to transact. Cameron Kusher says a "perfect storm" of conditions will see property prices continue to fall.