Australian capital city home prices steadied last week, including in Sydney and Melbourne.
According to CoreLogic, prices across Australia’s five mainland state capitals were unchanged over the week in average weighted terms, a performance in stark contrast to the trend seen in recent months.
The median value in Sydney, Melbourne and Brisbane — Australia’s largest property markets — was unchanged from a week earlier.
Of the smaller centres, price rose by 0.2% in Adelaide but fell 0.1% in Perth, leaving values unchanged across the mainland state capitals in weighted terms.
However, while values didn’t fall last week, they did in early May and late April, leaving prices down 0.2% over the past month on a weighted basis.
CoreLogic said prices fell in all mainland state capitals except for Adelaide over this period, led by a 0.4% decline in Melbourne.
Prices also fell by 0.2% in Sydney and 0.1% apiece in Brisbane and Perth.
This table from CoreLogic shows the performance by individual markets over the past week, month, year-to-date and year.
Even with a mixed performance over the past month, median values have fallen in each of these capitals in 2018, led by Sydney and Melbourne where prices have fallen 2.2% and 1% respectively.
Combined, and largely reflecting softer values in Sydney and Melbourne, prices in these cities have fallen 1.3% in average weighted terms this year.
Given recent weakness, in stark contrast to what was seen in the same period in 2017, prices in the mainland state capitals are now 0.7% lower than a year ago.
Again, that largely reflects outright price declines in Sydney and a sharp slowdown in Melbourne price growth over the year, along with ongoing weakness in the Perth market.
Along with tighter lending standards, affordability constraints, soft growth in household incomes and an overall deterioration in the outlook for where prices are heading, greater stock availability is another factor which is undoubtedly contributing to weakness in Sydney and Melbourne prices.
According to CoreLogic, total listings in Sydney currently stand at 27,071, up a massive 25.1% on a year ago. Stock up for sale has also increased in Melbourne, lifting 9.1% over the year to 31,539.
In contrast, total listings in all other capital cities are now lower that a year ago, a factor that could see the recent price divergence between Sydney and Melbourne and other parts of the country continue in the period ahead.
“We expect prices in Sydney and Melbourne to fall another 5% this year, another 5% next year, and to still be falling in 2020,” Shane Oliver, head of Investment Strategy and chief economist at AMP Capital, said earlier this month.
“Last year’s APRA-driven tightening in lending standards for interest only borrowers is clearly continuing to impact and along with poor affordability, rising supply, falling price growth expectations and the end of FOMO [fear of missing out] are pushing prices down in cities which have seen strong gains over the last few years.
“The latest round of tightening bank lending standards around borrower’s income and expenses will add to this.”
However, while Oliver expects further price decline in Sydney and Melbourne, he says Australia’s smaller capitals are likely to go in the other direction.
“Having not had the same boom over the last five or six years other capital cities are likely to perform better,” he says.
“Perth and Darwin look to have bottomed while Adelaide, Brisbane and Canberra are likely to see moderate growth and the boom in Hobart is likely to continue for a while yet.
“Similarly, home prices in regional centres are likely to hold up better with continuing modest growth as generally speaking they haven’t had the same boom as Sydney and Melbourne and so offer much better value and much higher rental yields.”