Australian house prices fall further led by Sydney and Melbourne

AUSTRALIAN house prices slid further in January as buyers in the triangle of Melbourne-Canberra-Sydney found themselves increasingly priced out of those markets, just as prospects strengthen for an interest-rate cut.

The Home Value Index for major cities fell 0.2 per cent in its second straight monthly decline, property consultancy CoreLogic said on Monday (Feb 3). Melbourne led the losses, dropping 0.6 per cent, followed by Canberra at 0.5 per cent and Sydney down 0.4 per cent. 

Brisbane, Perth and Adelaide kept growing though there has been a “clear and steady” loss of momentum, CoreLogic said. 

The outlook is expected to improve somewhat with the Reserve Bank widely expected to embark on an easing cycle at its Feb 17-18 meeting. That, together with better consumer sentiment, will likely support house prices in coming months, according to Tim Lawless, research director at CoreLogic.

Lawless cautioned though that a potentially gradual easing cycle, affordability constraints, slowing immigration and soft economic conditions suggest “the likelihood of a significant growth cycle over the coming year remains low”.

High rates, a shortage of supply and booming population growth post-pandemic triggered a housing crisis in parts of Australia. The problem has been particularly acute in Sydney where an average home costs 13-times income. 

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Combined with rates at a 13-year high of 4.35 per cent, buyers are simply unable to raise the funds need to purchase a property. 

As a result, rents have soared, though that market also ended the year on a softer note, CoreLogic said, citing an increase in the size of households in major cities and a cooling in migration.