The housing market in capital cities in Australia is cooling with the latest index showing that prices fell by 1.1% in May, mostly due to declines in Sydney and Melbourne.
These two capital cities have led the growth in recent months and years but in the last three months overall prices have fallen by 0.4% with four out of eight cities seeing prices coming down, according to the data from CoreLogic.
A breakdown of the figures show that prices fell by 1.7% in Melbourne and by 1.3% in Sydney month on month while quarter on quarter they were unchanged in Sydney and up 0.7% in Melbourne.
Year on year prices are still 11.5% higher in Melbourne at a median value of $665,000 and up 11.1% in Sydney to a median prices of $872,300.
Prices also fell month on month by 4.8% in Hobart, by 3.5% in Darwin, by 0.4% in Perth and by 0.1% in Canberra. Quarter on quarter prices fell by 1.5% in Canberra, by 1% in Hobart, by 0.4% in Perth and 0.1% in Darwin.
Year on year prices fell by 6.4% in Darwin to $460,000 and by 3.8% in Perth to $481,500. Median prices are now $350,000 in Hobart, and $600,000 in Canberra.
Two capital cities saw prices rise month on month with growth of 0.8% in Adelaide and 0.3% in Brisbane to a median value of £432,000 and $490,000 respectively. Quarter on quarter prices were up 2% in Adelaide and by 1.2% in Brisbane while year on year they were up 2.9% in Adelaide and 2.3% in Brisbane.
‘The trend in growth rates across the smaller capital cities was mixed with dwelling values across Brisbane and Adelaide continuing to inch higher while values in Perth and Darwin showed further easing over the most recent rolling quarter,’ said CoreLogic head of research Tim Lawless.
He pointed out that a steep drop in the Hobart index has reversed the gains recorded over the previous quarter and the Canberra index was also down. ‘The May home value results should be viewed in the context of demonstrated seasonality as values have fallen during May in four of the past five years,’ he explained.
‘Reading through the seasonality indicates that value growth in the market has lost momentum, particularly in Sydney and Melbourne where affordability constraints are more evident and investors have comprised a larger proportion of housing demand,’ Lawless added.
He also pointed out that adding to the complexity in reading the current market is the recent Australian Prudential Regulation Authority (APRA) announcements at the end of March for a new round of macro prudential measures aimed at slowing the pace of interest only lending and as a result mortgage rates are continuing to trend higher, particularly for investors.
Other market indicators suggest a slower pace of growth such as a reduction in market activity, a moderating trend in auction clearance rates and rising advertised stock levels and CoreLogic estimates of dwelling turnover for the combined capital cities are 6.9% lower year on year.
‘It appears that housing activity has eased which is attributable to a range of factors including affordability constraints, tighter credit policies, rising mortgage rates and a downturn in consumer sentiment towards housing,’ Lawless concluded.
