Capital city housing markets have generally tracked backwards over the September quarter as the lower interest rate driver of recent years dissipates.
Actions by policymakers to restrict residential investor activity through tighter lending conditions to that group have also acted to weaken prices growth over the last three months.
Domain reports that the national median house price declined by 0.5 per cent over the September quarter to $819,455 – the first quarterly fall recorded since December 2015 and the sharpest decline in the series since the September quarter 2011.
Sydney reported the steepest decline in house prices of all the capitals over the quarter with the exception of the volatile Darwin housing market.
Sydney house prices fell by 1.9 per cent to a median of $1,167,516 which was also the first quarterly fall by the local market since December 2015.
There were some exceptions
Hobart, Canberra and Melbourne were the only capitals to report house price growth over the September quarter with increases of 4.4 per cent, 4.3 per cent and 1.3 per cent respectively.
Although Melbourne prices increased, the rate of growth was nonetheless clearly the lowest reported by that city since the September quarter 2014.
Brisbane house prices declined marginally over the quarter, falling by just 0.2 per cent to continue what has been a subdued year so far for the local market.
Adelaide also recorded a marginal decline in house prices, down by 0.2 per cent which nonetheless followed five consecutive quarterly increases.
The Perth market continues to weaken with house prices falling for the third consecutive quarter – down by 1.3 per cent.
The current Perth median house price at $554,095 is now the lowest recorded by the local market since the September quarter 2012 – 5 years ago.
Despite recording a decline in prices over the September quarter, Sydney remains clearly the highest priced of all the capitals and well ahead of Melbourne the next highest at $880,902.
Hobart has recorded the highest annual growth in house prices of all the capitals at a booming 14.8 per cent but remains the most affordable with a current median of $409,592.
Melbourne and Canberra have also recorded strong house price growth over the past year, increasing by 13.9 per cent and 10.5 per cent respectively.
Capital city unit markets have also reported generally subdued prices growth over the September quarter with national median flat at $570,148.
Sydney unit prices eased marginally by 0.8 per cent over the quarter but at $732,321 remained 4.5 per cent higher than recorded over the September quarter last year.
Melbourne unit prices continue to surge, increasing by 3.4 per cent over the September quarter to a new record high of $506,334 – and have now risen strongly by 11.4 per cent over the past year.
Brisbane unit prices however are still falling, reflecting the recent record levels of new apartment development that has pushed supply well ahead of demand in the local market.
Prices fell by 3.5 per cent over the quarter and are now down by 6.5 per cent over the past year.
The Brisbane median unit price at $376,685 is now its lowest recorded for over three years.
Generally weaker capital city house price growth over the September quarter reflects the diminishing impact of record low interest rates that have fuelled markets over recent years.
The Sydney market has been the star performer with prices nearly doubling over the past five years but affordability barriers are now acting to dampen demand and moderate price increases.
Melbourne, Hobart and Canberra however are still in catch-up mode after relatively subdued periods of activity in recent years and are now recording solid to strong house price increases.
The resource capitals of Brisbane, Perth and Darwin continue to report flat to falling house prices indicating the ongoing economic impact of the end to the recent mining boom.
Recent record levels of new apartment development in most capitals have had negligible price impacts with demand continuing to absorb higher levels of supply.
The clear exceptions are again the Brisbane, Perth and Darwin markets where unit prices continue to fall.
Although official interest rates have been on hold since August last year, policymakers have acted recently to tighten lending to residential investors to offset perceived risk from lower prices as a consequence of higher mortgage rates – when and if that was to occur.
Latest ABS data reveals an across the board collapse in investor lending with most states recording significant declines in activity.
This has clearly impacted the Sydney market with NSW accounting for nearly half of all investor loans and with prices now falling similar to 2015 when comparable policies were introduced.
Policies designed to restrict investor lending are also impacting those apartment markets where supply is already well ahead of demand.
House price growth can be expected to continue to ease in most capitals over the reminder of the year although the underlying drivers remain positive.
Strong migration and undersupply are significant forces particularly in Sydney, Melbourne, Hobart and Canberra
Given current macroeconomic conditions the outlook clearly remains for official interest rates to remain low with only a remote prospect of sharply higher rates in the foreseeable future. Policymakers please note.
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