Australia’s house price downturn still has further to run, according to ANZ chief economist Richard Yetsenga, who said the decline was a substantial change in the housing market that probably needed to happen.

Yetsenga told the Australian Financial Review’s property summit that he expected prices to fall further following what he described as “the most consequential property tax changes since 1999”.

National property prices are down 3.6% from their March peak, according to Cotality. Yetsenga said that fall remained small when compared with the long-term increase in Australian property prices.

“Property prices in Australia have risen 6.5% a year for the last 30 years,” Yetsenga said. “We’re down about half of one year’s gains.”

He said prices had increased by about 1,000% over the same 30-year period and described the decline as marginal in that context, while acknowledging that falling values could still be disruptive and painful.

Yetsenga also rejected suggestions that falling house prices would necessarily trigger a recession. He pointed to mortgage repayment conditions, noting that less than 1% of mortgage holders were behind on repayments.

“We are probably going through quite a substantial change in the housing market, and one that probably needed to happen, and we’ve done it before,” he said.

ANZ has previously described the federal government’s housing tax changes as the most substantial changes to housing tax policy since 1999. The changes include limiting negative gearing for residential property to new-build homes from July 2027 and introducing a minimum 30% tax rate on capital gains.

Source: The Guardian