Sydney prices have declined a little: RBA statement of monetary policy
Conditions in the established housing market have cooled in recent months, the RBA has noted in its statement of monetary policy issued this morning.
Housing prices in Sydney have declined a little, conditions in Melbourne have eased following several years of strong price growth and conditions in most other capital cities remain subdued.
In Perth, housing prices were flat in the last quarter of 2017. In Brisbane, apartment prices have been relatively stable, following earlier price falls, while detached house prices have increased slightly.
Conditions in established housing markets continued to ease in the second half of 2017.
"This was most evident in Sydney, where housing prices have declined and auction clearance rates are below their decade average (Graph 3.12).
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"In Melbourne, housing price growth has declined and auction clearance rates have trended lower in recent months."
It suggested in Sydney and Melbourne, the decline in established housing price growth has been most pronounced for detached houses and for the most expensive properties; prices in both of these categories tend to have larger cycles than other market segments (Graph 3.13).
The increased supply of housing and an apparent reduction in demand from foreign buyers for newly built properties are likely to be placing downward pressure on prices in Sydney, Melbourne and Brisbane though this is being offset to some extent by increased population growth, especially in Melbourne.
The value of housing loan approvals has been broadly stable in aggregate since the end of 2016, though the composition has shifted towards owner-occupiers and away from investors, it noted.
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Overall, growth in advertised rents picked up in the second half of 2017 due to increases in Sydney and Melbourne.
Rents in Brisbane appear to have stabilised following earlier declines. Advertised rents in Perth have continued to decline, consistent with the ongoing high vacancy rate, but to a lesser extent than previously.
"If housing prices were to fall significantly, households might respond by curtailing their consumption expenditure and dwelling investment," it reported.
"Employment in the construction sector would also be weaker.
"Lower housing market activity would affect state government revenues, which may affect decisions about expenditure on activities such as infrastructure projects."
It noted however if, on the other hand, population growth were to pick up or the reported reduction in foreign demand for newly constructed properties turns out to be temporary, housing prices may be stronger than expected.
"In such a scenario, dwelling investment could increase, rather than broadly stabilise, or stay higher for longer than currently forecast.
Household indebtedness is high and debt levels relative to income have edged higher because household credit growth has continued to outpace weak income growth.
"Steps taken by regulators to address the risks in household balance sheets have seen the growth in riskier types of lending to households moderate, but risks remain," it noted adding a highly indebted household sector is likely to be more sensitive to changes in income, wealth or interest rates.