- Home prices in Sydney and Melbourne fell by 0.2% last week. Prices in the other mainland state capitals were flat to higher.
- Over the past year, Sydney prices have fallen more than those in Melbourne. However, the pace of price declines has been faster in Melbourne.
- Listing levels in Sydney and Melbourne have jumped over 18% from a year earlier.
Australian home prices continued to weaken last week as ongoing falls in Sydney and Melbourne masked flat-to-higher outcomes in the smaller capital cities.
According to CoreLogic, the median price across the mainland state capitals fell by 0.1% in average weighted terms, a result entirely driven by falls of 0.2% apiece in Sydney and Melbourne.
The modest declines took the price declines in Sydney and Melbourne over the past four weeks to 0.6% and 0.8% respectively, extending the decline so far in 2018 to 4.5% and 4.7% respectively.
Over the past year, Sydney’s median price has fallen 6.3%, outpacing a smaller 4.2% drop in Melbourne’s median value. The difference between the two reflects that Sydney prices have been falling for a longer period than in Melbourne. However, the pace of price declines has been faster in Melbourne than in Sydney in recent months, as indicated by the year-to-date declines.
The results fit with separate auction clearance rate data released by CoreLogic which has consistently shown only around half of all properties going under the hammer are selling in these cities, an outcome that in the past has coincided with ongoing price falls.
However, while median prices in Sydney and Melbourne continued to fall, there were stronger outcomes reported in the other mainland state capitals last week.
Prices in Adelaide rose by 0.1%, leaving values unchanged over the past four weeks. Median prices in Brisbane and Perth were unchanged from a week earlier although, due to prior declines, values in those cities have still fallen 0.1% and 0.5% respectively over the past month.
The decline in Perth over this period left prices down 3.4% year-to-date, and by 3.3% over the past year.
In contrast, values in Brisbane and Adelaide — less affected by affordability constraints than the other mainland southeastern state capitals — have increased by 0.3% and 0.6% respectively so far in 2018, and by 0.4% and 0.8% respectively in the past 12 months.
The drop in national weighted average price measures over the past four weeks, year-to-date and year, largely reflects that Sydney and Melbourne contain around 60% of Australia’s total housing wealth.
The divergence in price movements across the country over the past year is largely explained by supply and demand dynamics over the past 12 months.
On the supply side of the equation, listings in Sydney and Melbourne have soared by over 18% compared to a year earlier, significantly faster than in Brisbane, Perth and Canberra and in stark contrast to declines reported in Adelaide, Hobart and Darwin over the same period.
On the other side of the ledger, the impact of tighter lending standards towards interest-only and high debt and loan to income borrowers has undoubtedly helped to curtail demand in Sydney and Melbourne, those cities with the highest median home price to income ratios in Australia.
Along with a reduction in foreign buyer demand and growing pessimism towards the outlook for prices in these cities, it helps to explain the recent divergence in price trends to other parts of the country.
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