Melbourne housing market declined in May, and so did Sydney

Melbourne housing market declined in May, and so did Sydney
Melbourne housing market declined in May, and so did Sydney

Dwelling values across the combined capital cities fell 1.1 percent in May month on month on the back of declines in Sydney and Melbourne.

Releasing the CoreLogic May 2017 Home Value Index Results, Tim Lawless, CoreLogic head of research said values have fallen during May in four of the past five years.

Reading through the seasonality, he said, indicates that value growth in the market has lost momentum, particularly in Sydney and Melbourne where affordability constraints are more evident and investors have comprised a larger proportion of housing demand.

 “The past three months has seen capital city dwelling values rise by a modest 0.4 percent, with four of the eight capitals recording a fall. Over the past three months, Sydney dwelling values are unchanged while Melbourne values have increased by 0.7 percent,” he said.

“The trend in growth rates across the smaller capital cities was mixed with dwelling values across Brisbane and Adelaide continuing to inch higher while values in Perth and Darwin showed further easing over the most recent rolling quarter.

"A steep drop in the Hobart index has reversed the gains recorded over the previous quarter and the Canberra index was also -1.5 percent lower over the past three months.

“Adding to the complexity in reading the current market is the recent Australian Prudential Regulation Authority (APRA) announcements at the end of March for a new round of macroprudential measures aimed at slowing the pace of interest only lending.”

Click to enlarge

Melbourne housing market declined in May, and so did Sydney

He said another factor that is likely contributing to slower growth conditions is a dent in consumer confidence as consumer sentiment towards housing, as measured by Westpac and the Melbourne Institute, has shown a marked downturn in May.

“In particular, the Westpac ‘time to buy a dwelling index’, fell 6.5 percent over the month. According to Westpac, ‘consumer sentiment towards housing shows an increasingly negative view’.

"Other market indicators suggest a slower pace of growth such as a reduction in market activity, a moderating trend in auction clearance rates and rising advertised stock levels.

“It appears that housing activity has eased which is attributable to a range of factors including affordability constraints, tighter credit policies, rising mortgage rates and a downturn in consumer sentiment towards housing."

Click to enlarge

Melbourne housing market declined in May, and so did Sydney

According to the report the largest year-on-year falls have been in Melbourne (-12.4 percent), Brisbane (-11.1 percent) and Sydney (-4.3 percent) suggesting that housing demand has eased relative to a year ago across the three largest cities.

CoreLogic’s Mortgage Index was tracking 9.3 percent lower than at the same time last year over May.

The number of residential properties advertised for sale has started to edge higher across some cities, with Sydney in particular seeing a surge in newly advertised stock, up 15 percent compared with last year, while total advertised listings are now 6.3 percent higher than a year ago, according to Mr Lawless.

He said higher stock levels should provide prospective buyers with more choice and reduce some of the urgency that has been contributing to rapid selling times and price escalation. 

Click to enlarge

Melbourne housing market declined in May, and so did Sydney

"Based on the most recent data from the Australian Bureau of Statistics, investors comprised 48 percent of the value of new mortgage demand (excluding refinances) in March, well above the long term average, but the lowest proportion of mortgage demand since August last year," he said.

“Considering we are yet to see the full effect of the recent round of macroprudential measures flow through, there is a high possibility that investor activity, and consequently housing demand, will slow further during 2017.

“Investor demand will also be dampened due to higher mortgage rates and tighter credit policies as well as the added disincentive of low rental yields and reduced ability to claim depreciation and travel expenses.

“While we are expecting investment activity to slow, the fact is other asset classes aren’t likely to be as attractive as property to investors. Cash and bonds continue to provide low but safe returns and equities remain volatile. Considering the alternatives, we are likely to see property investment remain a popular option,” he said.

"Mortgage rates could edge higher over coming months as lenders accommodate recent macroprudential announcements within their credit policies.

"The funding levy announced in this year’s federal budget could also see higher mortgage rates as lenders potentially pass on some of the associated costs.

“The jury is still out on whether the housing market has peaked, however if it hasn’t, a peak could be just around the corner.

"Based on CoreLogic data, as well as other indicators, it’s fair to say that growth conditions appear to be slowing in Sydney and Melbourne while the performance across other capital city regions remains mixed.

"The housing market remains as diverse as ever and the flow of data over coming months will be critical to get a better understanding of the trends.” 

Residential Market Dwelling Values


Be the first one to comment on this article
What would you like to say about this project?