- Australian home prices fell again in February
- Annual price growth in Sydney turns negative for the first time since 2012
- CoreLogic says “a much clearer picture” will emerge in a couple of months
Australian home prices continued to fall in February, led once again by the nation’s largest and most expensive market, Sydney.
However, there are signs emerging that suggest the declines may not last for much longer.
According to CoreLogic’s monthly Home Value Index (HVI), prices fell by 0.1% last month in average weighted terms with further declines in the capital cities masking stronger growth in regional areas.
Prices in the capitals fell by 0.3%, largely reflecting declines of 0.6% and 0.1% respectively in Sydney and Melbourne, Australia’s largest markets.
Elsewhere, prices slid by 0.9% in Darwin, 0.3% in Canberra, 0.2% in Perth and 0.1% in Brisbane.
Prices were flat in Adelaide and rose by 0.7% in Hobart, continuing the strong performance from the Tasmanian capital over the past year.
While prices fell in a majority of the capitals, prices in regional areas bucked the trend, lifting 0.4%.
“Regional dwelling values increased by 0.9% over the three months and values were higher in the regional areas of all states except for Western Australia,” CoreLogic said.
That performance was in stark contrast to the capitals where prices fell by 1.2% over the same period, led once again by Sydney where prices fell by 2.4%.
Prices fell in all other capitals aside from Adelaide and Hobart in the three months to February.
“Hobart is the only city in which values remain at a historic high,” CoreLogic said.
“Values are below their peak levels in Sydney (3.7%), Melbourne (0.4%), Brisbane (0.1%), Adelaide (0.2%), Perth (11%), Darwin (22.3%) and Canberra (0.4%).”
With prices going backwards in most Australian capitals over the past few months, the annual rate of growth nationally slowed to 2.2% in February in average weighted terms, the slowest increase recorded since August 2016.
In Sydney, where prices have fallen the most in recent months, annual growth turned negative for the first time since 2012, falling 0.5% from a year earlier.
It joined Australia’s mining capitals — Perth and Darwin — in recording negative price growth over the year.
Across the remaining capitals, price growth over the year slowed everywhere except for Hobart where they jumped by a massive 13.1%, making Australia’s southern-most capital the hottest housing market in the country at present.
In regional areas, prices also outperformed, rising 2.8% over the year in weighted terms.
While prices nationally are still falling, largely reflecting weakness in Sydney and Melbourne, it is noteworthy that the pace of decline was slower than the 0.3% drop seen in January when capital city prices fell by 0.5%.
Tim Lawless, head of research at CoreLogic, said this reflects stronger housing market conditions in the second half of February, a period that coincided with a noticeable lift in auction clearance rates.
“The rate of decline eased over the second half of February… in line with improving auction clearance rates,” he said.
“Sydney, Melbourne and Perth all recorded more moderate falls in values in February than they did on January.”
Along with improving auction clearance rates in Sydney and Melbourne in the second half of the month, Lawless notes that increased first-home buyer activity, along with signs that lenders may be easing restrictions on investor borrowing, have also been seen recently.
“First home buyers are supporting demand at the lower-end of the market,” he says, pointing to stamp duty concessions offered to first time buyers in New South Wales and Victoria.
“Additionally, over the past month, some lenders have reduced rates on investment loans which may be indicative of lenders freeing up some funds for the investor segment given credit growth generally remains well below APRA’s macroprudential growth ceiling and benchmarks.”
Along with strong labour market conditions and high population growth, Lawless says the next couple of months should provide a much clearer picture as to whether prices will continue to fall.
“Considering the tighter credit environment, the eventual prospect of higher interest rates and ongoing housing affordability constraints, we expect housing market conditions will remain sedate relative to previous years,” he says.
“The reversal in capital gains has been mild to date — a clear sign that macroprudential measures have removed the heat from the market in a very controlled manner.”
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