Housing markets continue to lose steam

Home values in Australia’s most expensive city have posted their first clear month-on-month fall in 17 months.

A recent auction in Rozelle in Sydney.

Sydney dwelling values have posted their most convincing evidence yet of a slowdown, falling 0.1 per cent last month, according to CoreLogic data.

Putting aside a tiny fall in April, it’s Sydney’s first clear month-on-month decline after 17 months of consistent capital gains.

Meanwhile Melbourne values rose 0.9 per cent, the CoreLogic Hedonic Home Value Index for September found.

Today’s figures offer more signs Australia’s heated east coast housing markets are continuing to lose steam.

Values edged 0.2 per cent higher around the country last month and added 0.5 per cent in the September quarter, the slowest rate of quarterly growth since June 2016.

But soaring growth in the capital cities is losing steam, the research found.

The figures come amid a regulatory crackdown on lending to investors and interest-only borrowers in a bid to take some heat out of the markets, which appears to be having an impact.

“I think the lending clamps and the changed regulatory environment is a really big part of the slowdown we’re seeing and it probably explains why Sydney is showing quite a sharper slowdown than Victoria, is simply because we see a greater investment concentration in NSW,” CoreLogic head of research Tim Lawless told The Australian.

“The fact we are seeing more investment in the Sydney housing market than Melbourne — the tightening of lending conditions around interest-only and investment credit is having a much sharper effect on the Sydney market.”

Affordability constraints are also starting to bite in Sydney compared to Melbourne, which did not show the same level of affordability challenges and was being buoyed by stronger jobs growth and population growth, he said.

The dip in Sydney was driven by a 0.3 per cent fall in detached house values, while unit values rose 0.2 per cent last month.

Sydney was not subject to the same oversupply concerns as Brisbane and Melbourne and demand for units in the harbour city was supported by buyers who preferred to sacrifice space and live close to the city than stretch their budgets for a detached dwelling on the city fringe, Mr Lawless said.