Sydney\u2019s inner southwest has staged a dramatic real estate reversal in recent weeks, morphing from a booming market into the city region with the sharpest home price falls.<\/p>\n
Figures from PropTrack<\/a> revealed prices across the area, which includes much of the St George and Canterbury-Bankstown regions, tumbled by nearly 3.2 per cent over the past three months.<\/p>\n This fall eroded most of the market gains over the past year, when interest rates were much lower, with prices in the region now an average of 0.3 per cent lower than a year ago.<\/p>\n The last three months of price falls \u2013 the largest across the Greater Sydney area over the period \u2013 have been attributed to falling investor demand and uncertainty over recent government tax reforms.<\/p>\n MORE: Users of Albo first-home scheme going bust<\/a><\/p>\n The reforms included restrictions on negative gearing and capital gain tax changes that were announced in the May federal budget and passed through parliament last week.<\/p>\n REA Group economist Anne Flaherty said these changes pushed many investors out the market and the most noticeable impact was in areas that had attracted higher demand from aspiring landlords.<\/p>\n Sydney\u2019s inner southwest had, until recently, been a magnet for investors chasing higher rental yields.<\/p>\n Many of these investors relied on negative gearing tax benefits to support their holding costs, which are now no longer available for established dwellings, only new builds.<\/p>\n The result has been a sharp pullback in investor demand, and when investors step back in markets where they\u2019ve played a major role, prices can move quickly.<\/p>\n MORE: Aussie homeowners \u2018owed $1bn in refunds\u2019<\/a><\/p>\n Ms Flaherty said the damage hasn\u2019t been limited to landlords and speculators. <\/p>\n \u201cThere is also an expectation among home buyers that prices will continue to drop and that\u2019s made a lot of them hesitant to buy,\u201d she said.<\/p>\n Ray White chief economist Nerida Conisbee said uncertainty around tax reform has rattled many owner-occupier buyers.<\/p>\n Many who would have bought homes were increasingly wary about stepping into a falling market before knowing where policy and prices will land, she explained.<\/p>\n That hesitation is now becoming a market force in its own right, with many buyers choosing to hold off purchasing until they feel more confident about the market, Ms Conisbee said.<\/p>\n Others were shelving their plans altogether until there was more certainty about how the new tax settings will affect values.<\/p>\n MORE: Bombshell immigration finding exposed<\/a><\/p>\n It has created a vicious cycle: fewer investors, nervous home buyers, weaker competition at open homes and more pressure on sellers to cut expectations.<\/p>\n Sydney dwelling prices, based on sales of units, townhouses and houses, have fallen by an average of 2.5 per cent since this year\u2019s first of three interest rate hikes in February.<\/p>\n MORE: Jackie O\u2019s cunning $30m exit plan amid Kyle payout<\/a><\/p>\n Originally published as Surprise Sydney region now leading home price falls<\/a><\/p>\n