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Australia's housing market cools: Home prices fall, but rents soar
🇰🇷 South Korea /Economy & Trade

Australia's housing market cools: Home prices fall, but rents soar

From Dong-A Ilbo · () Korean

Translated from Korean and summarized by DistantNews. Read the original for the full story.

At a glance

Analysis Sources not specified Context piece
  • Australia's housing market is seeing a historic price drop, with national home values declining significantly since March due to government regulations and interest rate increases.
  • Historically, tax policies like 'negative gearing' and capital gains tax discounts fueled Australia's property boom; however, recent government reforms aim to curb investor activity.
  • While home prices fall, rental prices are skyrocketing, with experts predicting the pressure will shift to tenants as investors pass on increased costs.

Australia's once-booming housing market is now in a historic downturn, with national home prices falling 2% in just four months since peaking in March. Major cities like Sydney and Melbourne have seen declines of over 5%, a trend experts predict will continue, potentially marking the most significant market correction in 43 years.

This sharp reversal is largely attributed to a dual-pronged government strategy: significant tax reforms and aggressive interest rate hikes by the Reserve Bank of Australia (RBA). Historically, policies like "negative gearing" and a 50% capital gains tax discount encouraged property investment. However, the government recently announced reforms to phase out negative gearing for existing homes and reduce the capital gains tax discount, effectively increasing the tax burden on property investors.

Unfortunately, we expect the pressure to shift to tenants, and consequently, rents will become much more expensive.

— Nerida ConisbeeChief Economist at Ray White, commenting on the expected impact on rental prices.

Compounding these regulatory changes, the RBA has raised interest rates multiple times this year to combat inflation, pushing average mortgage rates to around 5.9%. This increased cost of borrowing is making it difficult for many property investors to maintain their portfolios, leading to a rise in properties being put on the market. Simultaneously, reduced buyer demand, partly due to the uncertain economic outlook and the shift in government policy, has caused auction clearance rates to plummet.

Despite the cooling property market, a paradoxical situation is unfolding: rental prices are surging. Experts warn that the pressure is shifting from homeowners to tenants. With many "Mom and Pop" investors potentially exiting the rental market or passing on increased costs due to the loss of tax benefits, the supply of rental properties is decreasing, and rents are expected to rise significantly. This creates a challenging environment for renters struggling to afford housing.

The housing market downturn is only about a third of the way through, both in terms of time and price.

— Sally AuldChief Economist at National Australia Bank (NAB), forecasting the market's future.
About this summary

Originally published by Dong-A Ilbo in Korean. Translated, summarized, and contextualized automatically by DistantNews, with a note on how the source frames the story. Not individually reviewed before publishing. How this works.

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