Market UpdatesAs the year draws to a close it certainly appears that the property boom that much of Australia had still been riding until earlier this year has come to an end, which while negative for many, spells positive news on the housing affordability front. The upshot is likely to be a more sustainable, balanced market where some equilibrium is restored and perhaps maintained for some time, delivering respite for buyers reeling from rapidly-inflating property prices noted over recent years.
This is especially true for Sydney and Melbourne, which ranked 8th and 17th respectively on the Top 30 Prime Property Hotspots Worldwide in the third quarter of 2017, according to New World Wealth Research. In fact, Sydney is now more expensive than Tokyo, Paris, Zurich and Singapore.
Now it’s Sydney’s deflating prices pulling the country average down in the most conclusive sign yet that the boom is over. According to data from CoreLogic, in October – traditionally a bumper month for property sales – average house prices across capital cities posted no growth at all.
During that month, Sydney house prices fell by 0.5 per cent, Canberra fell a nominal 0.1 per cent and Darwin dropped by 1.6 per cent. Adelaide and Perth each posted zero growth, with this result actually an improvement over a long period of falling prices in Perth. Of the capitals, only Melbourne, Brisbane and Hobart saw property prices increase, by 0.5 per cent, 0.2 per cent and 0.9 per cent respectively.
CoreLogic’s head of research Tim Lawless attributed the low growth primarily to tighter restrictions on lending. “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,” he said. He added that more expensive rates on interest-only loans were acting as a disincentive for property investors, particularly those that offered low rental yield.
However, it’s certainly not all doom and gloom. Despite the recent depreciation, house prices in Sydney are still 7.7 per cent higher than they were a year ago; Melbourne’s continued growth can be put down to a record-breaking migration rate which is creating strong housing demand but also slowing.
As a general rule, long-stable prices in non-metro regions continue to attract buyers deserting the now out-of-reach major city property markets.