Home prices in Sydney and Melbourne are still falling

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  • Australian home prices continued to fall in early July, dragged lower yet again by falling values in Sydney and Melbourne.
  • Total property listings have risen sharply over the past year, particularly in Sydney and Melbourne. However, new listings are currently lower than a year ago in all capital city markets except Hobart.
  • The ABS will release updated housing finance data this week. APRA Chair Wayne Byres will also deliver a speech that will be watched closely by market participants.

Australian home prices continued to fall in early July, dragged down yet again by declines in Sydney and Melbourne.

According to CoreLogic, the median price across Australia five mainland state capitals — Sydney, Melbourne, Brisbane, Adelaide and Perth — fell by 0.1% in average weighted terms.

Prices in Sydney, Melbourne and Perth all eased by 0.1%, while those in Brisbane and Adelaide were flat.

CoreLogic

Given they account for around 60% of Australia’s total housing wealth, price movements in Sydney and Melbourne are often influential on nationwide price measures.

Over the past month, and largely reflecting movements in the largest capitals, the national median fell by 0.4%, dragged down by declines of 0.6%, 0.5% and 0.4% in Perth, Sydney and Melbourne respectively.

In contrast, and maintaining the recent divergence in price movements across the country, values in Brisbane were unchanged over this period while those in Adelaide increased by 0.2%.

Year-to-date, Brisbane and Adelaide remain the only mainland capitals where values have increased, lifting modestly by 0.3% and 0.4% respectively.

Sydney, at 2.8%, has experienced the largest decline, outpacing falls of 1.9% and 1.1% respectively in Melbourne and Perth.

The declines left prices nationwide down 1.9% in average weighted terms so far this year.

From 12 months ago, prices in Sydney have now fallen 4.7%, more than double the 2.1% decline in Perth.

All other mainland state capitals, including Melbourne, have seen prices increase by between 0.7% and 1% over this period.

Largely reflecting the decline in Sydney and moderation in Melbourne, prices nationwide have fallen 1.9% over the past 12 months.

CoreLogic

The recent price trends mirror those seen in auction clearance rates which have fallen steadily in Sydney and Melbourne over the past year, a result largely driven by tighter lending standards being introduced by Australia’s banking regulator, APRA.

Higher listing levels have also played a part with the amount of stock on offer in Sydney and Melbourne lifting by 21.9% and 10.1% respectively over the past 12 months to 25,993 and 29,969.

Aside from Perth where they have increased by 0.3%, listings in all other Australian capitals have all fallen from 12 months ago, ranging from a decline of 1.9% in Brisbane to as much as 26.6% in Hobart.

CoreLogic

Given the scale of the decline in Hobart, it’s little wonder why Australia’s southern-most capital has experienced the largest price gains over this period.

Weaker listing levels also go some way to explaining the divergence between Sydney and Melbourne prices compared to other locations over the past year.

However, as shown in the table above, new listings — defined as properties that have not been put up for sale within the past six months — have fallen in all capitals except for Hobart from 12 months ago, including in Sydney and Melbourne.

That suggests weaker market conditions may be discouraging homeowners in Sydney and Melbourne from putting their property up for sale. The increase in Hobart also hints that some in the city are looking to cash in on the recent surge in prices, potentially pointing to a moderation in price growth ahead should new stock continue to hit the market.

Given persistent weakness in almost all Australian housing indicators, many will be looking at housing finance data from the ABS this week for evidence that the APRA-led crackdown on mortgage lending to highly-leveraged and highly-indebted borrowers is continuing.

APRA’s Chair, Wayne Byres, will deliver a speech on Wednesday that will detail his views of the mortgage lending market, APRA’s regulatory and supervisory strategy, and the health of bank balance sheets.

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