Property prices drop at fastest rate since December 2008.
Property prices drop at fastest rate since December 2008.

Housing slump now worse than GFC

PLUMMETING home prices in Sydney and Melbourne have dragged the Australian housing market into its biggest slump since the start of the global financial crisis.

Preliminary figures from CoreLogic's Hedonic Home Value Index showed national property prices fell 0.9 per cent over the first 28 days of November.

This would push total falls for the year to an estimated 5.6 per cent - the largest national drop in prices since December 2008.

Sydney recorded the biggest price falls of all the country's five major capitals, followed by Melbourne and Perth.

Sydney's median home price dropped 1.3 per cent over November and is now 8 per cent lower than a year ago.


Melbourne's median dropped 0.9 per cent for the month and 5.7 per cent for the year.

The fall in Perth was 0.6 per cent for the month and 3.7 per cent annually.

The housing markets of Brisbane and Adelaide were more resilient.

Brisbane was the only major capital to record growth in prices over November, albeit at a modest 0.1 per cent. Annual growth was expected to hit 0.2 by month-end.

The Adelaide median price was unchanged for the month, but has grown 1.5 per cent over the past 12 months.

CoreLogic head of research Tim Lawless said he expected the current downturn to last significantly longer than the one recorded in 2008.

"Back then the market was hit by an economic shock but it quickly recovered because of heavy stimulus from government," he said.

"This time it is a lot different because the economy is doing well and unemployment is generally low. It's almost all being driven by a change in credit policies and there's nothing to suggest there will be any intervention (from government)."

Melbourne was likely to claw its way out of the downturn before Sydney, he added.

"Melbourne is not close to bottoming out and there could still be record falls in prices, but demand for housing is stronger than in Sydney because of population growth and affordability is a little better," Mr Lawless said.


"One of the biggest issues for Sydney is that not enough people can afford to get into the market. The price-to-income ratio is just too high. People are also leaving the state for Queensland, so demand is falling."

Brisbane's more affordable prices relative to Sydney and Melbourne were helping prop up that market and it was arguably the country's most stable market, according to Mr Lawless.

Better affordability also meant Brisbane was not as exposed to the current lending climate, where banks were becoming increasingly restrictive in giving out new loans.

"The same thing is happening in Adelaide in some way, the prices are more affordable, so the market is stable. The difference is that there is a lot of interstate migration coming into southeast Queensland. South Australia doesn't have that."

Perth's 3.7 per cent fall for the year was one of the more unexpected results. The Western Australian capital had been showing signs of bottoming out earlier this year but appeared to be have recently taken a turn for the worse.

"Perth was on its way to recovery but that seems to have revered," Mr Lawless said. "That probably reflects the fragility of the WA economy at the moment."