It looks like Australian home prices are falling faster

Mark Kolbe/ Getty Images
  • Home prices across Australia’s five mainland state capital cities fell 0.3% over the four weeks in average weighted terms, according to CoreLogic.
  • Macquarie Bank says that suggests the annual drop in Australian home prices likely accelerated in April.
  • Tighter lending restrictions, especially for housing investors, is one factor that has likely contributed to recent price weakness.

Home prices across Australia’s five mainland state capital cities fell by 0.3% over the past four weeks in average weighted terms, according to data released by CoreLogic today.

The drop largely reflected ongoing weakness in Australia’s largest and most expensive housing markets, Sydney and Melbourne.

In nominal terms, prices fell by 0.4% in Melbourne, and by 0.3% in Sydney. Even with a mixed performance across the remaining mainland state capitals over the same period, it was enough to drag the national price gauge lower.

According to Macquarie Bank, the data implies that the drop in Australian dwelling prices accelerated in April in annualised terms.

Here, look.

Source: Macquarie Bank

It shows the annual change in Australian home prices, according to the CoreLogic data, overlaid against separate home price information released by Australian Property Monitors (APM).

Macquarie has seasonally adjusted the nominal price movements in the CoreLogic data to show the relationship between the two.

Based on the latest information, it suggests Australian home prices are now falling at a faster annual pace than earlier this year.

While a sharp increase in property listings over the past 12 months, especially in Sydney and Melbourne, along with ongoing affordability constraints, a decrease in foreign buyer activity and overall sentiment towards the outlook for prices, have all contributed to the recent pullback in prices, it’s clear that tighter lending standards have also been a contributing factor.

As seen in the chart above, annual price growth in national terms fell sharply following the introduction of restrictions on investor housing credit growth and interest-only mortgage lending by APRA in recent years.

The former began in late 2014 with the latter starting from March 2017.

It’s impact on housing credit growth has been pronounced, especially for investors.

This second chart from Macquarie shows annual growth in owner-occupier and investor housing credit on a three-month annualised basis.

This measures growth in the outstanding balance of Australian housing loans.

Source: Macquarie Bank

Investor credit growth, in particular, has slowed sharply as a result of APRA’s lending restrictions, resulting in a moderation in total housing credit growth in recent years.

Last week, APRA removed its 10% cap on annual housing investor credit growth for some lenders, an outcome that could lead to a pickup in lending to this cohort in the months ahead.

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However, with limits on interest-only lending still in place and further income and debt-based restrictions also likely to be implemented by the regulator, few expect a sharp rebound in either housing credit growth or actual house prices.

NOW READ: Tougher mortgage lending standards could risk a ‘credit crunch’ — and that would be bad news for the economy

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