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House prices fall across the nation, led by a 1.2% drop in Sydney

Posted: 20 June 2018 3:01 pm

Aerial view of houses.

House prices are down in 5 out of 8 capital cities, according to quarterly data from the ABS. Hobart bucked the trend with a solid 4.3% rise.

For years it was a story of non-stop growth, but Australian property prices really are moving in the other direction now.

The Australian Bureau of Statistics yesterday released its Residential Property Price Indexes: Eight Capital Cities report for the first quarter of 2018. Compared to the previous quarter, where most cities saw modest price gains, the start of 2018 saw prices drop in the following cities:

  • Sydney: -1.2%
  • Melbourne: -0.6%
  • Brisbane: -0.6%
  • Perth: -0.9%
  • Darwin: -1.1%

Adelaide prices grew by 0.5% while Canberra saw a 0.9% increase. The real success story is Hobart, where prices rose by 4.3%.

In explaining this performance, ABS Chief Economist Bruce Hockman said, "Positive economic conditions in Hobart, such as, solid jobs growth, rising employment, and an increase in net interstate migration, are underpinning demand for property." He also added, "Hobart has continued to experience consistently tight housing supply, which is leading to a strong rise in residential property prices."

Why are prices down?

There is perhaps a feeling of inevitability about price drops in Australia's big cities. Prices in Sydney and Melbourne have been growing steadily for years as strong investor interest, population growth and historically low interest rates fuelled a price boom.

But housing stock is catching up, lenders are getting stricter and regulators tougher. Investor activity has dropped sharply, and few Australians have had a large pay rise.

Unsurprisingly, as investors retreat, it's first home buyers who are the success story of the moment.

But what does this all mean for the average Australian?


The figures are bad news for investors hoping to see strong capital gains on their property investments. The good news (for landlords) is that rents are getting higher.

But if you've borrowed a lot of money to purchase a property hoping to see a fast capital gain, and used an interest-only loan to fund it, you could be in bigger trouble. A recent 7:30 report on interest-only loans covered the story of an investor whose properties in the coal mining town of Blackwater have halved in value since 2008.

With the interest-only period coming to an end, such borrowers could be slugged with big repayments, rental income that can't cover the loan and falling prices that mean even selling won't cover the debts.

But there are good purchases in every environment. Even within cities with falling prices, these drops aren't distributed uniformly. The right house in the right suburb could still outperform expectations. Research is always key.

First home buyers

If you're hoping to enter the property market for the first time, the drop in prices is welcome news indeed. Now looks like a good time to buy. But there's always the temptation (and the fear) that prices will continue to slide, leaving buyers paying off properties worth less than what they paid for them.

If you're buying a home to live in at a price you're comfortable with, any price drop after that point is somewhat theoretical. You're buying a place to live and prices will go up again at some point (probably). The main thing is not to borrow too much and to make sure you can handle a rate rise or two.

And regardless of your situation, shopping around for a lower interest rate will always save you money and is something every buyer needs to do.

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Data indicated here is updated regularly
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
$0 p.a.
Up to $4,000 refinance cashback.
A competitive variable rate loan from St.George. Refinancers borrowing $250,000 or more can get up $4,000 cashback for their first application (Other terms, conditions and exclusions apply).
Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)
$8 monthly ($96 p.a.)
Up to $3,000 refinance cashback.
A flexible and competitive variable rate loan. Eligible borrowers refinancing $250,000 or more can get $2,000 cashback per property plus a bonus $1,000 for their first application. Other conditions apply.
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate
$0 p.a.
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
Athena Celebrate Home Loan - 60% LVR  Owner Occupier, P&I
$0 p.a.
A very low variable rate for home buyers with 40% deposits or equity. This rate takes effect from 30 September for new and existing customers. You can get this rate if you apply today.
Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR ≤ 80% (Owner Occupier, P&I)
$0 p.a.
$2,000 to $3,000 refinance cashback.
Get a competitive variable interest rate with no application fee or ongoing fees. Refinance to an eligible Suncorp loan and get a cashback of $2,000 or $3,000, depending on your loan amount. Other conditions apply. Low Rate Home Loan with Offset - LVR Under 60% (Owner Occupier, P&I)
$0 p.a.
A competitive rate with no application or ongoing fee. This loan is not available for construction.
HSBC Home Value Loan - Promotional Offer (Owner Occupier P&I)
$0 p.a.
Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online.
Yard Variable Home Loan - LVR 80% Special (Owner Occupier, P&I)
$0 p.a.
A very low variable rate loan for home buyers with an optional offset account ($10 monthly fee). 20% deposit required.
Tic:Toc Live in 10% deposit Variable Rate - Principal & Interest
$0 p.a.
Get a very low interest rate and pay no application, settlement or valuation fees. Apply online for full approval in real time and add a 100% offset account for $10 a month.
Well Home Loans Balanced Variable - LVR 80% Special Offer (Owner occupier, P&I)
$0 p.a.
A very low interest rate for home buyers with 20% deposits saved. Add an offset account for a small fee. This special discount rate is available for new borrowers who apply and get approved by 30 November 2020. Not available for construction purposes.

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