Australian property market begins to cool, led by Sydney

(Bloomberg) – House prices in Sydney have fallen for a second consecutive month and home loans have fallen, adding to signs that Australia’s housing boom, fueled by ultra-low interest rates, is losing momentum.

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The country’s most populous city saw a 0.2% drop in March, while prices in Melbourne fell 0.1%, CoreLogic Inc. said in a report on Friday. Although prices continue to rise across the country, the monthly gain of 0.3% for the country’s eight major cities was the lowest since October 2020.

Separate government data showed the value and number of home loans fell in February, with new home loan commitments falling 3.7% to A$32.3 billion ($24.2 billion), down from the previous month’s record high.

Australia, like a number of developed economies, has seen strong gains in the property market during the pandemic as the central bank cut rates to near zero to support the economy. But rising expectations of policy tightening in the coming months are starting to dampen the ardor of buyers.

Housing affordability has also become a significant issue, with income growth lagging well behind that of house prices: between March 2020 and December 2021, wages increased by 3.3%, compared to an increase of 22 .6% of the value of the dwellings.

Soaring property prices in Australia push wealth to record high

“Virtually every capital city and major region in the rest of the state saw a spike in the trend rate of growth,” said Tim Lawless, director of research at CoreLogic. “The steepest slowdown has been in Sydney, where house prices are most unaffordable, advertised supply is trending up and sales activity is down over the year.”

The median house value in Sydney is now more than 17 times the country’s median wage.

What Bloomberg Economics says…

“As the economy recovers from the omicron hit in the first quarter and borders reopen, investor demand could pick up. This could potentially push up prices for multi-family units, which have lagged prices for individual houses.”

— James McIntyre, economist.

For the full report, click here.

Sydney’s growth rate fell to 0.3% in the first quarter of 2022, after peaking at 9.3% in the three months to May 2021, the data showed. A bright spot was regional Australia, where values ​​rose 1.7% in March.

Overall, national home values ​​have climbed 18.2% in the past 12 months, after hitting a “cyclical high” of 22.4% in January 2021, according to the report.

National housing turnover is also slowing, with preliminary estimates for transactions for the first quarter coming in at 14.3% lower than the same period last year.

(Adds data on home loans, economist commentary.)

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Penny D. Jackson