A royal pain for housing

Tighter lending likely to push down values

The banking royal commission is likely to lead to tighter lending conditions, which are in turn expected to further drive down already-struggling property prices.

A LIKELY tighter lending environment following the banking royal commission is expected to drive property prices down even further, with national house values registering 12 months of steady losses.

Property consultant CoreLogic’s national home value index showed a broadening of the housing market correction, with national values down 2.7 per cent in September since peaking 12 months ago.

The royal commission’s interim report, released on Friday, contained no draft recommendations, but CoreLogic’s head of research Tim Lawless said the home lending system had been let down by a failure to enforce existing laws.

He said regulators would be more assertive with regulation already in place and house prices would fall further.

“We’ve already seen tighter credit policy has been, in our view, the primary driver of the slowdown, particularly the reduction in investment activity,” Mr Lawless said. “If it becomes harder to get a loan or if more segments of the marketplace are restricted from credit then absolutely that should have a further dampening effect.”

House values were lower in five of the eight capital cities last month, but Mr Lawless said it was weakening conditions in Melbourne and Sydney, down 0.9 and 0.6 per cent respectively for the month, that still weighed heaviest.

“While the housing market downturn is well entrenched across Darwin and Perth, where dwelling values remain 22.1 per cent and 13.2 per cent lower relative to their 2014 peak … Sydney and Melbourne are now the primary drag on the national housing market,” he said. Sydney’s annual loss has tipped over 6 per cent for the past 12 months, while Melbourne has dropped 3.4 per cent.

“Not only are these among the largest annual falls across the capital cities, but considering (they) comprise approximately 60 per cent of the national value of housing … (they) have a substantial drag down effect,” Mr Lawless said.

Perth and Darwin have lost 2.8 and 3.7 per cent respectively for the year but prices in Hobart are going the other way, up 0.4 per cent in September and 9.3 annually.

Prices in Canberra have also bounced, up 0.3 per cent for September.