Home values rise just 0.1 per cent in April

SYDNEY and Melbourne housing markets are finally showing signs of cooling, but is it too early to call the peak?

SYDNEY and Melbourne housing markets are finally showing signs of cooling, with capital city dwelling values rising by just 0.1 per cent in April.

Figures from research firm CoreLogic reveal the slowest month-on-month growth since December 2015, largely due to a “broadly flat” April result in Sydney and Melbourne, where prices rose 0.04 per cent and 0.5 per cent respectively.

“We need to be cautious in calling a peak in the market after only one month of soft results,” said CoreLogic head of research Tim Lawless.

The soft results come after “dramatic capital gains” in the second half of 2016 and first three months of 2017, which saw Sydney dwelling values surge 11.3 per cent and Melbourne 12.6 per cent.

Hobart is currently the nation’s strongest performing housing market, with prices up 5.1 per cent over the quarter. Meanwhile, auction clearance rates across the five capital cities dipped below 70 per cent for the first time in three months.

“Overall, the softer housing market results for April are but one month of data,” Mr Lawless said. “Monitoring of the data flows over the coming months will provide firm evidence as whether this latest housing market reading develops into a softening trend.”

Mr Lawless said with mortgage rates remaining well below the long-term average — despite recent out-of-cycle rate hikes by the big banks — there should be a continuation of support for the housing market and investment demand.

“On the flip side, this current growth phase has been running for almost five years across Sydney and Melbourne,” he said. “It is rare for an upswing in the cycle to be sustained for this long and at such high growth rates.

“Affordability constraints are very much evident across Sydney, and to a lesser extent Melbourne which would be progressively impacting on housing demand. Additionally, investment-related demand is likely to ease due to the changed regulatory environment and tighter lending and servicing policies from the banking sector.”

He added that housing affordability was expected to be a key theme in next week’s Federal Budget, which could impact housing demand.

The nation’s financial watchdogs, the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission, recently announced a crackdown on interest-only home loans in a bid to address “heightened risks” in the housing market.

The Reserve Bank is expected to keep the official cash rate on hold at its monthly meeting on Tuesday, after no change in April. The RBA last cut the cash rate in August 2016 to its historic low of 1.5 per cent, following an earlier cut to 1.75 per cent in May. The last time the official cash rate increased was November 2010.

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