Spring sellers will be wearily watching auctions over the next few weeks after new figures showed a significant cooling in Sydney and Melbourne’s house prices.
Nationally, dwelling values remained flat in AugustThis drop was caused by a slowdown in Sydney’s residential market. At the same time, regional dwelling values slipped 0.2% lower, according to CoreLogic’s Hedonic Home Value Index for August.
Melbourne’s prices were only marginally up at 0.5%, and Brisbane registered a low 0.2%.
“[It’s] clear that the market has lost a lot of steam,” said Tim Lawless, CoreLogic’s head of research. “If we see the continuation of this movement we will see a negative trend soon.”
Sydney is experiencing a slowdown
Lawless states that Sydney’s capital gains, once very strong, have been reduced by tighter lending and affordability constraints. “The knock-on effect is a curb in investment credit growth and higher mortgage rates for investment and interest-only mortgages,” he said.
In the three months prior to August, the national housing market saw its lowest quarterly movements since June 2016. This is especially evident in Sydney where the quarterly peak was attained in November 2016.
Since 2012, when prices started rising, the median Sydney dwelling’s worth has increased by 75%. This represents a gain of approximately $521,000 on the median home value.
“Sydney’s quarterly growth rate peaked over the three months ending October 2016 when dwelling values jumped by 6.3%. Since that time, the rolling quarterly rate of appreciation in Sydney dwelling values has consistently eased, reaching the current rate of just 0.3%,” CoreLogic said.
Melbourne shows greater resilience
Melbourne saw stronger growth than November 2016, with a 1.9% quarterly gain, but still less than the 4.4% quarterly gain.
“The most recent three month period has seen dwelling values rise by 1.9%, less than half the peak rate of growth but substantially higher than Sydney’s pace of capital gains,” CoreLogic said.
Both buyers and sellers should expect a softening market
Reserve Bank will probably welcome slower growth in Sydney, Melbourne. “So far the trend has been gradual, implying that macro-prudential policies are having a flow through effect on housing conditions,” Lawless said.
A major reason for slowing down home value appreciation in Sydney is the high cost of housing relative incomes.
“The recent availability of stamp duty concessions in New South Wales and Victoria is likely to provide some support for first-time buyers, however it’s not likely that that a rise in first-home buyer activity will completely offset the demand gap left by fewer investors,” Lawless said.
If current trends continue, Sydney and Melbourne’s dwelling values will decline as they move through their cyclical highs.
