Home values across Australia’s capital cities have dropped 0.3% in November, suggesting that the heated housing market may be losing its steam. This fall follows a 1% increase in combined capital city home values recorded in October, according to the CoreLogic RP Data Home Value Index.
Melbourne house prices dropped 2.6% in November after experiencing record growth this year – a significant drop from the 1.9% growth recorded in October. Sydney recorded a 1% increase in home values over the month, down slightly from 1.3% growth in October. Home values also increased in Brisbane (0.4%), Perth (0.9%) and Hobart (0.2%).
Over the three months to November, combined capital city home values rose by just 0.8%. Over those three months, prices increased in Sydney, Brisbane and Perth but fell across all other capital cities. CoreLogic RP Data research analyst Cameron Kusher says the slowdown in capital growth is further evident when we take annual growth rates into account.
“Although combined capital city home values increased by a healthy 8.5% over the 12 months to November 2014, the annual growth rate is now at its lowest level in the year - the rate of annual home value growth across the combined capital cities continued to slow after peaking at 11.5% over the 12 months to April 2014.”
Excluding Hobart, across each capital city the annual rate of capital growth is now lower than its recent peak. Kusher says this suggests that most cities have now moved past their cyclical peak.
“Importantly, this has become apparent in the two largest capital cities; Sydney and Melbourne, where annual value growth peaked at 16.7% in April 2014 and at 11.9% in January 2014 respectively,” he said.
Over the year to November, Sydney recorded an annual growth rate of 13.2%, while Melbourne’s annual growth rate was recorded at 8.3%.
“Although Sydney and Melbourne appear to have moved through their peak periods, capital growth conditions have consistently been the main drivers of value growth over the past 12 months,” Kusher said.
According to Craig James, chief economist at CommSec, the slowdown in national house prices means that any regulatory intervention may not be necessary.
“The slowdown in national home prices together with the very mixed results across capital city housing markets mean that there is no need for the Reserve Bank to progress with so-called macro prudential controls on property investors.
“In essence, the market is correcting itself with more supply coming on to the market as evidenced by new listings and softer demand for homes in response to the higher prices. There is no bubble – demand ran ahead of supply in some capital cities like Sydney but markets are balancing.”