Australian house prices fell 0.5% in September 2018 and some commentators think it’s the fault of Commonwealth Bank of Australia (ASX:CBA) and its Big Bank peers.
Commonwealth Bank of Australia, National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) have all come under scrutiny from the Royal Commission, with Commissioner Hayne saying banks put greed first.
For now it’s costing banks hundreds of millions of dollars to make things right, but some alarmists are predicting price falls of 40% with lenders like Commonwealth Bank, Suncorp Group Ltd (ASX: SUN) and AMP Limited (ASX: AMP) all increasing their interest rate for borrowers.
The big banks were accused of using the House Expenditure Measure (HEM) too readily and lending too freely. Now the banks are cutting back on lending and declining people who want to refinance.
House prices:
According to the CoreLogic September home value index, national house prices fell by 0.5% and have declined by 2.7% over the past 12 months.
However, things seem worse in capital cities. Sydney house prices fell 0.6% in September and are down 6.1% over the past year. The Melbourne house price fall was even steeper at 0.9% for September and down 3.4% in the past year.
Brisbane house prices were up 2% for the month, with Adelaide prices down 0.2%, Perth down 0.6%, Hobart up 0.4%, Darwin down 0.4% and Canberra up 0.3%.
CoreLogic head of research Tim Lawless said:
“Not only are these amongst the largest annual falls across the capital cities, but considering Sydney and Melbourne comprise approximately 60% of the national value of housing, the weak conditions in these cities have a substantial drag down effect on the overall national housing market performance.”
No-one knows for certain when the decline will end, many economists think the ‘peak to bottom’ will be somewhere between 10% to 15%. As a result, some pundits think interest-only investors could face a financial cliff if they can’t refinance nor afford the higher repayments.
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