Australian dwelling prices fell by the most in almost 5 1/2 years as spending cuts and tax increases in last month’s federal budget weighed on homebuyers.
Average home prices in the nation’s eight biggest cities fell 1.9 percent in May, the biggest monthly drop since December 2008, according to the RP Data-Rismark Home Value index. All major cities except Darwin and Canberra recorded declines, with Melbourne seeing the biggest drop of 3.6 percent, the index showed.
“With affordability becoming more challenging and rental yields substantially compressed across Australia’s two largest cities, we wouldn’t be surprised if the growth trend moderated further over the year,” Tim Lawless, research director at RP Data, said in an e-mailed statement.
Approvals to build or renovate homes and apartments fell 5.6 percent in April from a month earlier, the third straight decline, the statistics bureau said today. The Australian dollar fell after the reports underscored expectations the central bank will maintain record-low interest rates this year.
Last month’s decline in home prices was the first drop in a year. It came as consumer confidence fell to its lowest level since August 2011 after the government’s budget flagged spending cuts and a new tax on high-income earners.
“Weakness in sentiment has flowed through to weaker housing market sentiment,” said David Cannington, senior economist at Australia & New Zealand Banking Group Ltd. “It’s softened clearance rates and taken some of the heat out of the market.”
The top 25 percent of the market had the biggest decline in values in the three months through May, recording a 0.5 percent drop, according to RP Data. The most affordable end saw a 2.8 percent gain, it said. Prices in the biggest cities rose 10.7 percent in the 12 months to May, the index showed.