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Falling Sydney prices drive a slowdown in Australian property
[SYDNEY] Falling Sydney home prices are driving an Australian property slowdown, risking a further hit to consumer confidence.
Australia's dwelling prices rose 5.2 per cent in the year to November, half the pace of six months earlier, CoreLogic Inc data showed Friday. In Sydney, which accounts for about a third of the value of housing nationally, prices extended month-on-month declines, the data provider said.
With housing values falling, an erosion of consumer confidence could "have a flow-on effect for other sectors of the economy," Tim Lawless, the head of Australian research at CoreLogic, said in a statement.
The housing market is unlikely to be thrown a lifeline via interest-rate cuts as happened in the past, he said. The market expects rates to stay on hold before rising in December 2018, according to a Bloomberg data.
The Sydney slowdown mirrors events after Australia's prudential regulator in December 2014 called for banks to cap home lending growth at 10 per cent per year, CoreLogic said.
However, that was before record low interest rates and foreign buyers reignited the housing market in Australia's financial capital, propelling it to be the world's second most expensive.
This time around, the cooling in Sydney comes after regulators clamped down on interest-only mortgages typically favoured by investors. Rising state taxes have also made housing more expensive for foreign buyers.
Australia's interest rates are expected to stay on hold as the central bank waits for low unemployment to translate into stronger wage growth.