House and unit prices are in decline across the nation’s capitals with Melbourne and Sydney weaker than other cities.
House prices across national capitals have fallen in January for the first time in three years as booming costs discouraged buyers and regulators slugged investors’ loan costs.
Both house and apartment prices fell for the first time since late 2012, but performances varied across state capitals.
Median house prices were down 0.4 per cent across the nation’s capitals to $695,788 in the December quarter. It was the first fall since the December quarter of 2012.
Neville Sanders, president of the Real Estate Institute of Australia, which produced the figures, said Sydney and to a lesser extent Melbourne were acting as a drag on the rest of the capitals.
0312housing-trends03“Strong growth in Hobart, Canberra and Brisbane, followed by marginal increases in Darwin and Perth, were unable to offset falling median house prices in Sydney and Melbourne while Adelaide recorded no change over the quarter,” Mr Sanders said.
Sydney has been slugged
“Sydney, the strongest market in the recent years, showed the largest decrease in median prices leaving some commentators speculating whether the city’s housing market has reached its peak,” Mr Sanders said.
Melbourne was reasonably steady with prices falling just 0.1 per cent to $718,000. Sydney was down 2.5 per cent to $1,025,478 while the largest rise, 9.8 per cent, was recorded in Hobart where the median price is $392,000.
Overall, apartments performed slightly worse than houses with the national capital city median price falling 0.7 per cent to $543,468.
There still aren’t many bargains
Despite the latest softening, median house prices were 7.4 per cent higher than in December 2014 and units are 5.7 per cent higher.
Housing still appeared to be over-valued with prices 18 per cent above the long term trend.
The weakness continued with Australian Bureau of Statistics figures showing a 4.3 per cent fall for new owner occupied housing loans to $20.5 billion for the month of January.
Enthusiasm from investors continued to wane, with investor housing loans down 1.6 per cent to $11.36 billion for January. Regulatory moves to push up the cost of investment loans is affecting the market strongly, with investor loans down 14.8 per cent to compared to a year ago, when they totalled $13.32 billion.
That decline results from moves by the Australian Prudential Regulation Authority (APRA) to discourage investors by pushing up the cost of investment loans.
Action on negative gearing by stealth
Shane Oliver, chief economist with AMP Capital, told The New Daily that the move away from housing investment was so marked that “it could mean that APRA has done to a degree what the supporters of restrictions to negative gearing aim to do”.
“Labor’s plan is to slow investor demand and raise revenue,” Mr Oliver said.
APRA’s moves have slowed demand but do not boost government coffers so an incoming Labor government may still choose to ban negative gearing on exiting properties, Mr Oliver said. “That could hit the market. If it had too much of an effect they might wind it back,” he said.
APRA seemed concerned that wealthy investors are getting around its tough investor rules by shifting their investment loans onto their owner-occupied mortgages to take advantage of lower rates.
The regulator has written to the major mortgage lending banks warning them to make sure they submit accurate figures on the breakdown of different loan types.
Mr Oliver says housing prices have been volatile over the last year with Sydney leading the field. “Auction clearing rates are back around 70 per cent in Sydney.”
Australian house prices are higher than comparative markets overseas.”Until recently Australia had a chronic under supply of over 100,000 dwellings.”
“Completions are at record levels but they are just catching up with the undersupply of prior years,” Mr Oliver said.