Australia's house prices begin to cool as Sydney, Melbourne drop

[SYDNEY] Sydney home prices fell for a second straight month in a further sign that Australia's property boom, fuelled by ultra-low interest rates, is losing momentum.

The nation's most populous city recorded a 0.2 per cent drop in March, while prices in Melbourne slipped 0.1 per cent, CoreLogic said in a report Friday (Apr 1). Although prices are still advancing across the country, the 0.3 per cent monthly gain for the country's 8 major cities was the equal lowest since October 2020.

Australia, like a number of developed economies, recorded significant property market gains through the pandemic as the central bank cut rates to near zero to prop up the economy. But rising expectations of policy tightening in the months ahead is beginning to cool buyer ardor.

Housing affordability has also become a significant issue, with income growth trailing well behind property-price gains: between March 2020 and December 2021, wages increased 3.3 per cent compared with a 22.6 per cent lift in dwelling values.

"Virtually every capital city and major rest-of-state region has moved through a peak in the trend rate of growth," said Tim Lawless, CoreLogic's director of research. "The sharpest slowdown has been in Sydney, where housing prices are the most unaffordable, advertised supply is trending higher and sales activity is down over the year."

The median home value in Sydney is now more than 17 times the median salary in the country.

Sydney's growth rate eased to 0.3 per cent in the first quarter of 2022 from a peak of 9.3 per cent in the 3 months through May 2021, the data showed. One bright spot was regional Australia, where values rose 1.7 per cent in March.

Overall, national home values have climbed 18.2 per cent over the past 12 months, after reaching a "cyclical high" of 22.4 per cent in January 2021, the report showed.

National housing turnover is also cooling, with preliminary transaction estimates for the first quarter tracking 14.3 per cent below the same period last year. BLOOMBERG