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Australian house prices just fell for the 11th consecutive month

Property analytics business CoreLogic AU today reported that national property prices fell 0.3% over the month of August, with the major markets of Melbourne, Perth and Sydney leading the market lower.

In Melbourne and Perth average dwelling values fell 0.6% over August, with prices down 1.7% and 2.1% respectively over the past year.

Sydney’s prices fell 0.3% over the month and are now down 3.5% over 2018 and 5.6% over the past 12 months.

On the bright side is the relatively strong performance of the Canberra, Hobart, Brisbane and Adelaide markets, with all posting small price gains over the last quarter and gains of between 0.9% (Brisbane) and 16.2% (Hobart) over the past year.

As such the housing market remains two tiered with Sydney and Melbourne posting faster falls after faster gains, while regional markets exhibit less volatility due to stabler supply and demand dynamics, alongside the exclusion of other inputs such as overseas investment and the health of the high-end market.

The price falls also remain modest in the context of a five-year 2012-2017 property bull run for Melbourne and Sydney homeowners.

While it’s also worth noting that different properties in different areas are falling much further or less than the median range.

Just as if some stocks will fall 15% and some hold their value when the stock market index falls 5% over a year, so will property prices in Sydney that are anywhere from level over the past year to falls well into the double digits.

For share market investors the tough outlook for property prices means bank shares are likely to continue their long trek sideways, with Westpac Banking Corp (ASX: WBC) recently introducing an out-of-cycle 14 basis point rate rise in response to what it claims are higher wholesale funding costs.

As a result Suncorp Group Ltd (ASX: SUN) and Bendigo & Adelaide Bank Ltd (ASX: BEN) have also announced plans to lift home loan lending rates, with members of the ‘big 4’ such as National Australia Bank Ltd (ASX: NAB) also likely to be weighing up their options.

Rate rises will directly put more pressure on house prices, especially in combination with tighter lending restrictions (around calculating borrowers’ monthly expenses, etc) that are being implemented as a result of the public grilling the banking industry is enduring at the Royal Commission into financial services.

It seems Australian house prices may have topped out for a long time yet and the share market could offer investors superior returns….

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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