Sydney, Melbourne home prices fell in May, but experts not calling downturn yet
Home prices in capital cities fell by more than one% in May, including falls in Sydney and Melbourne, but experts say it is too early to call a housing downturn.
In Sydney, home prices fell 1.3% while Melbourne’s dropped 1.7%, according to Corelogic's latest Hedonic Home Value Index.
Hobart had the steepest fall at 4.8%.
National house prices fell 1.1%, driven mainly by the declines in Sydney and Melbourne, Corelogic said.
The property analytics firm’s head of research Tim Lawless said the jury was still out on whether the housing market had peaked given previous strong rebounds in 2015 and 2016 following dips.
“The May home value results should be viewed in the context of demonstrated seasonality; values have fallen during May in four of the past five years. Reading through the seasonality 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,” Lawless wrote in his blog on CoreLogic.
"I wouldn't be surprised if things bounce back," Lawless was quoted as saying by The Australian Financial Review.
However, SQM Research's Louis Christopher warned the fundamental driver of housing, population growth, was still very strong, The Australian Financial Review reported.
"When the ABS population numbers came out recently, they were higher than anyone had expected. That is why oversupply has not happened," he said.
"Prices could still rise in the second half, if nothing further happens."
Year on year was a different story though, with Sydney prices increasing 11.1% while Melbourne rose 11.5%, CoreLogic data showed.
Real estate agents said it was too early to call a downturn as demand is still strong despite softer auctions clearances and sales. But they also attribute the price fall to a seasonal rise in stock, after a drought of low listings earlier in the year, the AFR said.
"People have more choice, and we haven't had that for quite a while. A little bit more stock, and interest rate chatter. People are rethinking and not pushing too hard," The Agency chief executive Matt Lahood said.
"We need a quarter to score it … it's just a bit early.
"An RBA cash rate cut could again push up prices, but Lawless said there were enough counter measures to stop that for now.
"If the cash rate falls, we are already compensated by mortgage rates pushing up higher. Already we see are higher mortgage rates for investors. If there is a rate cut, it would be followed by further macroprudential changes. They [regulators] would do their best to avoid 2015."
He added that a fall in consumer confidence has also dented the market a little.
"Consumer sentiment towards housing, as measured by Westpac and the Melbourne Institute, has shown a marked downturn in May."
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, Lawless said.
But even if there was a "permanent" correction, McGrath founder John McGrath said any downturn would not be "major".
"What I do know is there is no crash coming that resembles the ones that have been speculated. I've heard about this mythical crash for over 30 years and prices just keep going up over time. But I'm equally confident that this market cycle is close to its peak," he said.