“Significant turn of events” devalues Sydney homes

by Miklos Bolza02 Nov 2017
Property prices in Sydney have experienced their first quarterly fall since May 2016, while conditions remain flat elsewhere across the country.

Looking at the previous 12 months, growth in dwelling prices sits at 7.0% in the nation’s capitals and 4.9% in regional areas, according to the CoreLogic October Home Value Index.

Only three capitals exhibited negative property dwelling growth between August and October: Sydney (-0.6%), Perth (-0.7%) and Darwin (-4.4%).

“Seeing Sydney listed alongside Perth and Darwin, where dwelling values have been falling since 2014, is a significant turn of events,” said CoreLogic head of research Tim Lawless

This is the first quarterly drop in Sydney since May 2016 when the first round of macro-prudential changes were starting to bite and mortgage rates were dropping after the first cash rate cut.

Despite this however, Sydney property prices are still up 74% since the city’s growth cycle began in early 2012.
  Change in dwelling values
  Month Quarterly Annual
Sydney -0.5% -0.6% 7.7%
Melbourne 0.5% 1.9% 11.0%
Brisbane 0.2% 0.6% 2.7%
Adelaide 0.0% 0.1% 4.6%
Perth 0.0% -0.7% -2.5%
Hobart 0.9% 3.3% 12.7%
Darwin -1.6% -4.4% -5.7%
Canberra -0.1% 1.1% 6.4%

The slowdown in the pace of capital gains can be linked to tighter lending policies and a changed landscape for borrowers, said Lawless.

“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.

“Additionally, interest only borrowers and investors are facing premiums on their mortgage rates which are likely to act as a disincentive, especially for investors who are generally facing low rental yields on investment properties.”

The peak rate of growth for dwelling values matches up with the peak rate of growth in investment lending in late 2016, Lawless said.

“We saw the housing market respond in a similar fashion through 2015, and the first half of 2016 as investors faced tighter credit conditions following the announcement from APRA that lenders couldn’t surpass a 10% speed limit on investment lending.”

Conditions rebounded quickly in the second half of 2016 once these investment credit limits were achieved and the cash rate was adjusted in May and August, he added.

Related stories:

Resi lending surges by $5bn

73% of investors opting for brokers

First home buyer activity on the rise