You can thank the financial regulators and the big four banks for that.
Especially if you live in Sydney, the property boom is over, with property investors discouraged from entering the market as interest-only mortgages attract higher interest rates and auction clearance rates fall.
Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) have all instituted some form of restricted lending to investors, whether it be higher interest rates, higher loan-to-valuation ratios or both.
According to the Australian Financial Review (AFR), Sydney has recorded the lowest spring clearance rates in three years. The AFR reports that Sydney had a 73% clearance rate over the last weekend according to RP Data, and Domain Group senior economist Andrew Wilson expects rates to fall below 70%.
As the AFR reports,
"Sydney is plunging," Dr Wilson said. "September has seen the lowest spring clearance rates in three years and it's no spike, it's consistent. We may be looking at a clearance rate below 70 per cent before year's end. That could even happen at next weekend's Super Saturday."
Usually, spring is the best time to sell a house, but you might have to be very quick and realistic about your price expectations.
What you think you might have got last week or last month, you will probably have to lower that price. With investors discouraged from the market, first-home buyers lucky to afford to buy a bedroom, Sydney's property market has begun to see the demand for properties fall.
Some agents suggest Sydney property prices have passed their peak. Many people forget that Sydney house prices fell by 14% in 2008/2009 and another 10% in 2011, as we wrote in July this year.
Melbourne is likely to follow, and the rest of Australia's capital cities will no doubt fall into line as well, although outside our two major capital cities, housing price growth has been low.
Melbourne clearance rates are also 73% and higher than a year ago, but there is softening demand for apartments in the inner-city according to Wakelin Property Advisory director Richard Wakelin.
Mr Wakelin has told the AFR that attendance at auctions has thinned out considerably and bidding is lukewarm.
Despite the falling clearance rates, not all suburbs and houses are following the trend – as you might expect. Some properties are still selling well above reserve prices, and some suburbs will continue to experience strong price growth.
Foolish takeaway
If you only thought house prices went up and never fell, you could be in for a big shock. Property investors in mining towns in Western Australia and Queensland have already experienced massive falls in the values of their properties. As the ABC reports, a Port Hedland house bought for $1.3 million four years ago, was passed in at auction for $360,000 in February 2015.
While the price falls in Australia's capital cities aren't likely to be as dramatic, there's no doubt that house prices are set to fall.
