Property price growth slows month on month in Australia’s hottest cities
Property prices increased by just 0.1% month on month in April in Australia’s capital cities, suggesting that the hottest housing markets in Sydney and Melbourne are slowing.
Overall it was the lowest month on month rise since December 2015 with a moderation of growth in Sydney bringing the index lower. Sydney saw prices fall marginally by 0.04% while in Melbourne they crept up by 0.5%.
The data from the latest CoreLogic capital cities index also shows that prices also fell month on month by 2.8% in Canberra and by 1% in Perth while other cities recorded marginal rises, up 0.5% in Darwin, up 0.6% in Brisbane, up 0.8% in Adelaide and up 1% in Hobart.
Year on year prices are considerably higher in many cities, led by growth of 16% in Sydney and 15.3% in Melbourne. Hobart has also seen strong annual growth with prices up by 13.6% and Canberra up 8.4%.
But prices in Darwin are still 2.3% below where they were a year ago and in Perth they are down by 6%. Other cities have seen moderate annual growth, up 2.2% in Adelaide and up 2.1% in Brisbane.
According to Time Lawless, head of CoreLogic research, the softer results across Australia’s two largest capital cities comes after dramatic capital gains were recorded over the second half of 2016 and the first three months of 2017.
Indeed, between July 2016 and the end of March 2017, Sydney dwelling values surged 11.3%, whilst Melbourne values increased slightly more at 12.6% in the same period and prices overall have risen by 75.1% over the past five years, an annual rate of growth of 15% over this period.
Quarter on quarter the price index was up 2.9% with Hobart recording the strongest quarterly rise of 5.1% over the past three months. Lawless said that Hobart’s housing market has staged a solid improvement over the past two years and is now the third best performing capital city on an annual basis, with dwelling values moving almost 14% higher over the past 12 months alone.
But he warned that April’s figures do not mean that the market has peaked. ‘We need to be cautious in calling a peak in the market after only one month of soft results. April, in particular, coincides with seasonal factors including Easter, school holidays and ANZAC day long weekend,’ he said.
‘The softer results should also be viewed against a backdrop of an ever evolving regulatory landscape s which is firmly aimed at slowing investment and interest only mortgage lending. Testament to this is mortgage rates which have been edging higher, particularly for investors and interest only loans, as well as rental yields which have been hovering around record lows. The higher cost of debt, as well as stricter lending and servicing criteria, has likely dented investment demand over recent months,’ he explained.
‘In a city like Sydney, where more than 50% of new mortgage demand has been from investors, a tighter lending environment for investment purposes has the potential to impact housing demand more than other cities,’ he added.