Housing minister concedes she wants house price change after steepest decline on record

Housing Minister Clare O’Neil has defended her party’s housing agenda after new data showed house prices had fallen across every capital city for the first time in 15 years. 

The Domain House Price Report found the median house price fell by 4.7 per cent, or $59,970, in every capital city in the September quarter, with some cities seeing almost $89,000 wiped.

O’Neil told the ABC on Thursday she wanted to see house prices, which peaked at a national median of more than $1 million, change.

“I do want it to change. We need house price growth slow,” she said in response to the figures.

O’Neil said house price growth over the last generation has been unsustainable for the country.

“The big picture is that over a 25‑year period in our country house prices have grown by 400 per cent, and the results of that for the nation are not surprising,” she said.

The report found Perth saw the largest decline in house prices of about $88,600, followed by Sydney with $82,400 and Brisbane with $66,000.

Domain chief of research and economics Nicola Powell said the sharp declines signalled a hard-to-ignore deterioration in market conditions.

“These were among the strongest markets of the previous growth cycle, but affordability constraints and weaker sentiment have caught up with them, resulting in some of the sharpest quarterly falls on record,” she said. 

The federal government’s changes to property tax benefits in May have partly been to blame for falling house prices, as investors have been less incentivised at the auction.

The Australian Bureau of Statistics has recorded the total value of homes fell by $34.1 billion from the March quarter to $12.9 billion in the June quarter.

The housing minister described falling house prices as a market “correction” in June, sparking some humdrum over whether the government was actively trying to lower the value of homes.

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Politicians have traditionally avoided doing so as about 67 per cent of Australians own their own home, including 35 per cent who still have a mortgage owing.

Falling house prices also trigger fears of increasing negative equity, where the value of a home drops below the mortgage owing, but Reserve Bank of Australia data from May shows figures remain historically low at under 1 per cent.

Treasurer Jim Chalmers was forced to walk back O’Neil’s remarks, saying she had been speaking about a “general situation where house prices have softened a bit”.

As house prices fall, the cost of mortgage repayments has risen following four interest rate hikes this year.

Reserve Bank deputy governor Andrew Hauser on Wednesday said the inflation outlook is “materially worse” than what was previously projected, increasing the possibility of another hike in November.

“The challenge that’s facing the board, it has done for some time, is do you do more to tackle higher inflation, recognising that that means weaker activity, weaker labour market?,” he said.

“Or do we hold our horses to protect the labour market, to try and protect some of the labour market, and mindful of the potential that there may be more downside momentum of the economy, but accept the risks in so doing that the upside inflation risk embeds, and that becomes more expensive to deal with?

“Those are hard choices.”