Property prices in Sydney dropped for the first time in nearly one-and-a-half years, falling 0.1% lower in September. In contrast, strong gains in Hobart and Melbourne have continued, according to CoreLogic’s latest Home Value Index.
Sydney property prices rose just 0.2% over the September quarter, the weakest result since values dropped in the March quarter of 2016. Nevertheless, previous strength in this market means the annual increase in prices to September 30 was still 10.5%.
Across the Sydney housing market, it was the detached housing sector that pulled monthly and quarterly growth rates lower. While unit values are also appreciating at a slower rate, detached housing values were 0.3% lower over the month of September and 0.2% lower over the September quarter, whereas unit values recorded a subtle rise.
“Potentially the affordability challenges facing Sydney buyers within the detached housing sector are pushing more demand towards the medium to high density sector, where, based on median values, houses are almost $290,000 more expensive than units,” said Tim Lawless, head of research at CoreLogic.
He said the relative weakness in Sydney was likely due to the higher proportion of investors in that market who’re affected by the regulatory crackdown on investment and interest-only home loans.
“We’re still seeing more than half of mortgage demand in Sydney is investment based, whereas in every other state we are seeing investors [constituting] less than half of mortgage demand,” Lawless told ABC News.
While Melbourne’s housing market is also showing slower growth conditions, overall growth remains relatively resilient compared with Sydney’s growth. Dwelling values were nearly 1% higher over the month of September and rose by 2% over the September quarter.
“The stronger housing market conditions in Melbourne are supported by auction clearance rates which have consistently remained above 70%,” Lawless said. “Additionally, advertised stock levels remain remarkably low and private treaty sales continue to sell rapidly, averaging 30 days on market.”
Housing demand and property price growth in Melbourne are being buoyed by Australia’s fastest growing population. According to Michael Workman, senior economist at Commonwealth Bank of Australia (CBA), Victoria’s population rose by 2.43%, or 149,000, over the year to March 2017. A lift in net overseas migration and net interstate migration have also contributed to robust population growth.
In Hobart, the past 12 months have seen dwelling values surge 14.3% higher, the Tasmanian capital’s highest annual growth rate since 2004. Hobart also saw a 1.7% rise in dwelling values over the month and a 3.4% rise in dwelling values over the quarter.
“Despite the strong capital gains, the cost of housing remains substantially lower than any other capital city with a typical house value of $412,340 and a median unit value of just under $320,000,” CoreLogic said.
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