Australian house price growth stalls

Photo: Simon Bruty/Allsport

Australian house price growth stalled last month, according to data released by CoreLogic today.

The group’s upgraded Hedonic Home Value Index revealed that house prices were flat in August, with a 0.1% increase in capital city prices offset by a 0.2% drop in regional areas.

This table from the group shows the change in prices, both for August, over the past three months and year.

Source: CoreLogic

In August, prices in Canberra and Hobart grew by 0.6%, the fastest of all capital cities.

Melbourne prices grew by 0.5%, while those in Brisbane rose by a smaller 0.2%. Sydney, once the hottest of all Australian capital markets, saw no growth in August.

Price in Adelaide were also flat, while those in Perth and Darwin — Australia’s mining capitals — fell by 0.8% and 2.2% respectively.

The slowdown saw national price growth cut to just 0.5% over the past three months, with capital city prices once again outperforming regional locations.

The national increase was the slowest in any three-month period since June last year.

Over that period prices in Melbourne and Hobart surged by 1.9% apiece, well ahead of all other capital cities, including Sydney.

From a longer-term perspective, price growth in Australia’s southeastern capitals continued to outperform with increases of 12.7% or more recorded in Sydney, Melbourne and Hobart over the past year.

The strong gains in Sydney and Melbourne — the largest housing markets in Australia — saw prices increase by 8.9% nationwide over the year in weighted terms.

Still, as seen in the chart below, the momentum in price growth is now slowing in both capitals and regional areas.

Source: CoreLogic

“This steady result provides further evidence that the housing market has moved through its peak growth phase,” said Tim Lawless, head of research at CoreLogic.

“We’re seeing capital gains in markets like Sydney, which were previously very strong, now being weighed down by affordability constraints and tighter lending conditions.”

Prices in Sydney and Melbourne have both doubled since the start of 2009, according to data previously released by the Group. In response to such rapid price growth, Australia’s banking regulator, APRA, has taken steps to reduce investor activity in recent years, capping annual investor credit growth at 10% and limiting the proportion of interest-only loans to 30% of total new mortgage lending.

Given the moderation seen in Sydney and to a lesser degree Melbourne over the past few months, along with historic patterns, Lawless says that prices in both cities may experience modest falls in the period ahead.

“If the current trends continue, by the end of the year we could see dwelling values across Australia’s two largest housing markets, Sydney and Melbourne, trend lower as they move through their cyclical peaks,” he says.

“Historically, a negative shift in home values has followed every growth phase, so it’s reasonable to expect a period of moderate value falls following such a sustained period of strong capital gains.

“With the Spring selling season about to commence, it will be interesting to monitor the impact of higher inventory levels on the Sydney and Melbourne market, particularly so given evidence of slowing growth conditions accompanied by stock levels already being higher than they were a year ago across both cities.”

This expanded table from CoreLogic shows the change in both house and unit prices by individual capital city over the past month, quarter and year.

Source: CoreLogic

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