Australia home price growth cools in Oct: RP Data

[SYDNEY] Growth in home prices across Australia's capital cities slowed in October as tightened rules on investment lending and rising mortgage rates let the steam out of the Sydney market.

Monday's figures from property consultant CoreLogic RP Data showed dwelling prices across the major cities edged up 0.2 per cent in October, from September when they climbed 0.9 per cent.

Annual growth in home values dipped to 10.1 per cent, from 11.0 per cent in September. Again, the headline numbers masked wide divisions between cities.

For October alone, Sydney prices nudged up by 0.3 per cent, while Melbourne rose 0.6 per cent after a big increase the month before. Prices fell in Brisbane and Perth, while Adelaide enjoyed an unusually strong month with a gain of 1.5 per cent.

Annual price growth in Sydney stood at 15.6 per cent, with Melbourne just behind at 12.8 per cent. Sydney had the highest median dwelling price of A$800,000 (S$800,000), followed by Melbourne's A$600,000.

Regulators have reacted to the bullish conditions in Sydney and Melbourne by tightening lending standards for property investment with the aim of keeping annual growth in investment lending at 10 per cent or less.

The major Australian banks also announced increases in mortgage rates last month both for investors and home owners, blaming higher regulatory costs. "It's not just the fact that mortgage rates have recently risen outside of any lift in the cash rate," said RPData head of research Tim Lawless.

"We are also seeing approximately a 30 per cent premium on investment related mortgage rates, tighter lending standards and borrowers generally requiring a larger deposit."

Home prices have come a long way, with median values in Sydney up 77 per cent since the end of 2008, and policymakers are keen to see a slowdown in price growth.

Mr Lawless also noted that gross rental yields had fallen to record lows of 3.4 per cent for houses and 4.3 per cent for apartments.

REUTERS