House prices in Sydney and Melbourne fell last week, offsetting modest gains in each of Australia’s remaining three mainland state capitals.
According to CoreLogic, prices fell by 0.2% in Sydney, leaving the decline over the past four weeks at 0.7%. From a year earlier, prices in Australia’s largest and most expensive housing market increased by 4.2%, well below the high-teen levels seen earlier this year.
Joining Sydney in the falling house price club, Melbourne values also weakened, falling 0.1% during the week. However, in stark contrast to it’s northern neighbour, prices in the city have risen by 0.4% over the past month, leaving values up 9.6% from 12 months earlier.
So Melbourne price growth is slowing, just not yet to the same degree as Sydney.
The deceleration coincides with a slowdown in investor activity due to tighter restrictions on interest-only lending implemented by Australia’s banking regulator, APRA, in March this year.
Partially as a result of tougher macroprudential restrictions, auction clearance rates in Sydney recently fell to the lowest level in two years, and an 18-month low in Melbourne.
Higher-than-usual housing stock on offer in Sydney, along with affordability constraints and differences in population growth, help explain why Melbourne house prices are holding up better than in Sydney for the moment.
Despite the price decline in Australia’s largest housing markets, Australia’s other mainland state capitals managed to buck the trend last week with Brisbane, Adelaide and Perth all registering an increase of 0.1%.
Over the past month, prices in Perth have increased by 0.5%, suggesting that the cyclical downturn in the west may now have run its course, benefiting from better economic conditions, higher commodity prices and less stock available for sale.
Over the same period, prices in Adelaide grew by 0.2% while they were flat in Brisbane.
Despite the recent outperformance, prices in Perth are still 2.4% lower than a year ago, still lagging increases of 3.1% and 2.5% respectively in Adelaide and Brisbane.
From a national perspective, the gains in the smaller capitals were not enough to offset price decline in Sydney and Melbourne last week in weighted terms.
Combined, prices fell by 0.1%, the same as the monthly result, leaving the change on a year earlier at 5%, well below the 10% plus levels seen just seven months ago.
Largely reflecting the slowdown in Sydney and Melbourne, the chart below suggests we’re now well and truly past the peak in the current price cycle.