The number of unsold homes in both Sydney and Melbourne continue to rise, with total listings now 24 to 34 per cent higher than last year. New listings have retreated as vendors shyed away from the market.
Another indication of the momentum that is gathering in the housing downturn is the growing discount between listing and final selling price agreed by sellers.
Corelogic data this week shows the average discounting in Sydney is between 8.8 to 8.9 per cent whereas Melbourne sellers are accepting a 7.3 to 8.6 per cent discount for their properties. A 5 per cent discount was the norm during the housing boom.
Falling prices and slowing demand would further curtail housing supply and investments, likely to shave off about 0.5 percentage points in GDP growth, Capital Economics’ Marcel Thieliant said in a note on Monday.
The only saving grace would be a fiscal move by the Federal Government to support the housing market such as an increase in the first home buyer’s grant as seen in 2008, he said.
In 2008, the tripling in the First Home Owner Grant from $7000 to $21,000 boosted home sales. The impact of the grant increase was particularly positive then as the market was already recovering.
However, any new grant this time around might not be as successful as 2008, Mr Theliant warned.
“The key point though is that additional support for first-time home buyers would probably come too late to prevent a slump in dwellings investment,” he said.
“The upshot is that we would still expect dwellings investment to fall by 6 per cent this year, shaving off around 0.5 percentage points from annual GDP growth.”