Housing growth sinks to lowest level in 31 months

Credit: Alex Livet

Housing market conditions in Sydney and Melbourne continue to cool, while other states recorded a mixed bag from small value increases to moderate declines.

That’s according to the latest CoreLogic RP Data March quarterly results.

Capital city property values rose just 0.2% in March and 1.6% for the quarter. Sydney dwelling values rose 1% in March and 2% for the quarter, while Melbourne house prices dropped 0.6% in March, but grew 2.2% for the quarter.

Sydney’s median dwelling (including both detached houses and apartments) was $730,000, while Melbourne’s was $560,000.

CoreLogic RP Data head of research Tim Lawless said, “Compared to the final quarter of 2015, when capital city dwelling values were down 1.4%, the housing market has shown a modest rebound in growth which is well below the strong capital gains recorded over the first half of 2015.

He added, “The housing market has been losing momentum since July last year, when capital city dwelling values were increasing at an annual rate of 11.1%”.

In the middle of 2015, APRA, the banking regulator took a number of steps to enforce guidelines for lending to property investors by the banks. As a result, Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) took major steps to limit the growth of lending to property investors by hiking their interest rates and requiring higher deposits.

Booming property prices have also meant rental yields – further deterring investors from entering the property market particularly in Sydney and Melbourne.

Mr lawless also noted that roughly 20% of all Melbourne council area units were resold at a gross loss. “Such a high proportion of loss-making resales is a likely indicator of negative equity developing in this precinct as a result of supply outstripping demand,” he said.

We wrote earlier this week that some unit owners in Melbourne were being forced to take up 30% cuts off the price they paid to get a sale.

Foolish takeaway

CoreLogic RP Data says the results point to a controlled slowdown in the Australian property market, but there is nothing to suggest sharp declines ahead. That may mean that housing price growth for 2016 and 2017 will be flat to low, particularly in Sydney and Melbourne.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

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