House prices slowed sharply in February as Sydney records first monthly fall since 2020: CoreLogic

Property prices in Sydney and Melbourne still weaker than smaller capital cities, as market continues to run out of steam.

Auctioneer Michael Garafolo calling a recent auction in Sydney’s Strathfield. Picture: Sam Ruttyn

Property prices in Sydney and Melbourne have continued to diverge from the smaller capital cities as the market continued to run out of steam through February.

New monthly data from property researcher CoreLogic showed housing costs rose 0.6 per cent nationally last month in what was the smallest gain since the pandemic boom began in October 2020 and close to half the January result (up 1.1 per cent). Every capital city and broad state regional areas are now recording a slowing in trend in value growth, although at an increasingly divergent rate.

The weakest results of the month were achieved in the country’s two largest cities. Sydney recorded it’s first fall in prices since the pandemic boom began in October 2020 with a minute decline 0.1 per cent, while Melbourne held steady (no change) through February.

CoreLogic’s director of research Tim Lawless said the slowdown is a result of an increase in the number of property listings as sellers look to capture the top of the market ahead of a likely rate rise, giving buyers more choice.

“Definitely, a factor contributing to a slowdown is there there’s more supply, there’s more stock for people to choose from. There’s more opportunities to negotiate and less urgency for buyers,” Mr Lawless said.

“Interestingly enough, the trend in new listings is above where it was a year ago in every capital city. So we’re definitely seeing vendors taking advantage of both the strong selling conditions that are still evident but also probably starting to see more evidence of vendors looking to exit the market around the peak, probably in anticipation that selling conditions may not be quite as strong later in the year.”

The total number of properties listed on the market in Melbourne is now nearly 5 per cent above the previous five year average, reflecting the normalised growth rate over the past quarter. Sydney is also moderating, now just 4 per cent below the five-year average for total listings.

Elsewhere, the smaller capital cities that had been driving growth have also begun to normalise. Brisbane – which has been leading growth over the last quarter – rose 1.8 per cent in February, showing no impact of the floods that devastated southeast Queensland in the final few days. Adelaide rose 1.5 per cent, while Hobart increased 1.2 per cent, which Mr Lawless noted was still a strong result.

Darwin and Canberra each rose 0.4 per cent and Perth gained 0.3 per cent. Prices in regional Australia increased 1.6 per cent.

Mr Lawless expects a multi-speed market to emerge through the remainder of 2022, ahead of Sydney and Melbourne leading a downsizing next year.

“Both these markets are very unaffordable,” the economist said.

“They’ve also been hit by some demographic headwinds, as well as we see interstate migration moving away from the South Wales and Victoria.

“So I think we’ll continue to see Sydney and Melbourne probably down the bottom of the league tables for some time, probably moving through a downtrend earlier than most of the other capitals.”

February marked two years since the start of the pandemic, which has led to share market volatility and dire predictions about the housing market. Since, homeowners have gained a quarter (24.6 per cent) of their pre-pandemic price on average, equivalent to around $144,000 on the cost of the median Australian dwelling.