Capital city home prices have fallen for a seventh consecutive month as cautious consumers pull back from major purchases amid poor business conditions outside the resource sector.
And, in a further sign that the residential property market is softening, the average time it takes to sell a home in the capital cities have risen to 55 days, from 45 days a year ago.
The RP Data-Rismark Hedonic Home Value Index fell by 0.6 per cent in July, seasonally adjusted, the seventh straight monthly fall in capital city home values.
On average, home prices in the capital cities fell by 2.9 per cent over the year to July.
Regional markets fell by 0.7 per cent in the month of July for a decline of 2.4 per cent year over the 12-month period.
The slump was spread unevenly, with Brisbane down 6.6 per cent, Perth down 6.3 per cent, and Melbourne down 4.3 per cent.
Sydney and Canberra bucked the trend to rise 0.5 per cent and 1.9 per cent, respectively.
RP Data research director Tim Lawless said the weakness reflected consumers’ lack of confidence about the future of their finances.
“According to the August Westpac-Melbourne Institute Consumer Sentiment survey, Australians still expect two rate hikes over the next 12 months,” Mr Lawless said.
“Combined with volatile equity prices, global financial market instability and soft house prices, Australians are understandably reluctant to make high commitment decision at the moment.”
Westpac senior economist Matthew Hassan said the weakness in the residential property market was concerning as it suggested most sectors were “experiencing significant price corrections rather than just price slippage”.
“The downturn nationally is still a fairly ‘soft landing’, but with consumer sentiment slumping badly through July/August there is a risk further price declines could see a negative-feedback loop develop between prices, expectations and demand in some markets,” he said.
Mr Hassan said if the Reserve Bank of Australia (RBA) cut interest rates by 100 basis points from December, as Westpac had forecast, that should be sufficient to restore demand and stabilise house prices in 2012.
Rismark International economist Christopher Joye said he expected the housing market to find its feet if the RBA left interest rates on hold, or began cutting rates.
However, he said a cut was unlikely.
“If the RBA has really comes to the end of its tightening cycle – which we would find surprising given the high core inflation revealed over the last six months – 2011/12 will likely be judged one of the best buying windows seen in some time,” Mr Joye said.
Home values have fallen most sharply in the premium housing sector, which lost 6.2 per cent this year compared with a 2.1 per cent decline in the cheapest suburbs.
“Clearly the ongoing financial market volatility is having a more marked impact on wealthier households, as are weak business conditions outside of the resources sector,” Mr Lawless said.
The level of vendor discounting widened to a discount of 7.2 per cent in July, from a 5.7 per cent discount in July last year.
