Australia's Housing Downturn Is Spreading Across the Map

Australia's housing correction is broadening. Cotality's national Home Value Index fell 0.9 per cent in August, its fifth consecutive monthly decline, leaving national values 3.6 per cent below the March peak. Through winter, 93 per cent of capital city suburbs recorded a fall in value.

Sydney is carrying the heaviest load. Values fell 1.4 per cent in August and are 7.1 per cent below their February peak. Melbourne and Canberra fell 1.1 per cent, Brisbane 1 per cent, and Adelaide and Perth 0.8 per cent. Cotality estimates that sales volumes are 15.5 per cent below a year ago and 11.5 per cent below the five year average.

The supply response is losing momentum just as demand weakens. The Australian Bureau of Statistics reported on 1 September that seasonally adjusted dwelling approvals fell 3.6 per cent in July to 17,687. Private sector house approvals fell 4.2 per cent to 10,199, while the value of residential building fell 4.9 per cent to $11.26 billion. Approvals remain 9 per cent above a year earlier, but the monthly fall is a warning for a market that still needs more homes.

Higher borrowing costs and Canberra's housing tax changes are both part of the adjustment. The Reserve Bank has raised rates three times this year, and the government has restricted negative gearing and changed capital gains tax settings. ABC reporting on the Cotality release says the combination is weighing on demand, with the largest declines appearing where prices and debt have run furthest.

That is the awkward arithmetic of housing policy. Australia is trying to make homes more affordable by cooling the buyers who compete for them, while the builders who can add supply face higher finance costs, weaker presales and a tax regime that keeps changing. A cheaper auction result helps only if a household can still obtain a mortgage and a builder can still make a project stack up.

The constructive answer is supply that can respond. Planning approvals should be faster and more predictable. Local infrastructure should be funded where it unlocks homes rather than where it flatters a minister's announcement. Tax rules should reward new construction and then stay put long enough for capital to work. Reliable, affordable energy would lower the cost of building and living in every suburb.

A national fall in prices can look like relief on a chart. It becomes relief for families only when more homes reach the market and the cost of producing them falls. Australia's fifth monthly decline is a signal to remove the barriers to building, before a correction in prices turns into a correction in supply as well.