Sydney is leading what looks like a slowdown in the Australian housing market

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October was another soft month for Australian house prices, continuing the trend seen in August and September.

According to CoreLogic, prices across Australia’s five mainland state capitals were unchanged again last week in average weighted terms, mirroring the result one week earlier.

Source: CoreLogic

By individual capital, prices in Sydney fell by 0.1%, offsetting a 0.2% gain in Melbourne.

The contrasting price performance fits with a recent divergence in auction clearance rates between the two cities with Melbourne continuing to outperform Sydney since the middle of the year.

Prices in Brisbane, Adelaide and Perth were unchanged over the week.

Over the past four weeks, price growth nationwide has also stalled with a 0.4% decline in Sydney offset by a 0.5% gain in Melbourne.

As the two largest housing markets in the country, it explains the flat national result given the sheer weighting applied to price movements in these cities.

Of the smaller capitals, prices rose by 0.2% in Brisbane and were unchanged in Adelaide and Perth over the same period.

So it’s a Sydney-led national slowdown, in other words.

Source: CoreLogic

The weakness in Sydney likely reflects a combination of affordability constraints, higher listing levels along with attempts from Australia’s banking regulator, APRA, to curb investor activity in Australia’s housing market.

Sydney has traditionally been a popular location for property investors.

With just two days left in the month, today’s figures suggest that October was another weak month for Australian house prices, continuing the trend since July.

According to separate data from CoreLogic, house prices across the country rose by 0.2% in September after falling flat in August.

Again, reflecting the sheer size of their property markets, the national slowdown largely reflects weakness in Sydney, offsetting gains in Melbourne.

However, Melbourne is also showing signs of cooling with auction clearance rates and prices both pulling back from levels earlier in the year.

With prices in Sydney stalling and those in Melbourne starting to decelerate, price growth in Australia’s mainland state capitals has slowed to 7.1% over the past year, well below the double-digit levels just a few months ago.

As at the end of September, prices nationally were up 8% in average weighted terms.

CoreLogic will release its more comprehensive Home Value Index report for October — including data on smaller centres — on Wednesday, November 1.

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