Sydney house prices continue to fall in October

MELBOURNE’S housing market is “resilient”, but something just happened in Sydney which experts have described as “significant”.

SYDNEY home values continued to slide in October, with the nation’s biggest housing market recording its first quarterly fall since May 2016.

Figures from property research firm CoreLogic released on Wednesday showed Sydney’s median dwelling value fell 0.5 per cent in October to $905,917, accelerating from a 0.1 per cent fall in September — the first drop in 17 months.

Sydney joins Perth and Darwin as the only cities to record a fall in dwelling values over the past three months, down 0.6 per cent, 0.7 per cent and 4.4 per cent respectively.

“Seeing Sydney listed alongside Perth and Darwin, where dwelling values have been falling since 2014, is a significant turn of events,” CoreLogic head of research Tim Lawless said in a statement.

Despite the recent slowdown, Sydney dwelling values are 74 per cent higher than when the growth cycle kicked off in early 2012.

“The slowdown in the pace of capital gains can be attributed primarily to tighter credit policies which have fundamentally changed the landscape for borrowers,” Mr Lawless said.

“Lenders have tightened their servicing tests and reduced their appetite for riskier loans, including those on higher loan-to-valuation ratios or higher loan-to-income multiples.

“Additionally, interest-only borrowers and investors are facing premiums on their mortgage rates which are likely to act as a disincentive, especially for investors who are generally facing low rental yields on investment properties.”

Mr Lawless said the peak rate of growth in dwelling values lined up closely with the peak growth rate for investment lending in late 2016.

“We saw the housing market respond in a similar fashion through 2015 and the first half of 2016 as investors faced tighter credit conditions following the announcement from APRA that lenders couldn’t surpass a 10 per cent speed limit on investment lending,” he said.

“Of course, housing market conditions rebounded swiftly through the second half of 2016 once the investment-related credit limits were achieved and the cash rate was adjusted lower in May and August last year.”

Nationally, median house prices were unchanged over October, both in the combined capital cities and combined regional areas.

Melbourne rose 0.5 per cent to $710,420, Brisbane 0.2 per cent to $490,525, Hobart 0.9 per cent to $396,393, Darwin fell 1.6 per cent to $437,910, Canberra was down 0.1 per cent to $582,882, while Adelaide and Perth were flat on $430,303 and $462,624 respectively.

CoreLogic attributed Melbourne’s “resilient” conditions, marked by quarterly growth of 1.9 per cent, to Victoria’s record-breaking migration rate creating unprecedented housing demand.

“Despite the stronger growth profile, Melbourne dwelling values are now rising at their slowest quarterly pace since mid-2016,” Mr Lawless said.

He said further falls in dwelling values “should not come as a surprise”, but there were “a variety of factors that are likely to support a soft landing across Australia’s housing market”.

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