Property data analytics business CoreLogic has reported that Australia’s median house price fell 0.6% in March, with “six of the eight capital cities recording a fall in values over the March quarter, led by Darwin (3.9%), Melbourne (3.4%), Sydney (3.2%).”
In total Sydney’s average residential property price is now down 10.9% over the past year, with Melbourne down 9.8%.
Over March prices across the two major capital cities fell 0.9% and 0.8% respectively.
On the bright side other capital such as Brisbane, Hobart, Canberra and Adelaide have all delivered positive returns between 2.7% and 11.1% over the past year for property owners.
As such we can see that Australia has a two-speed property market with Melbourne and Sydney swinging further thanks to the greater impact of overseas investors, among other things.
The regional capitals tend to be more predictable in delivering low-to-mid-single digit growth over the long term in line with inflation and modest population growth.
For share market investors the continued weakness in Sydney and Melbourne home prices means shares in the big banks like Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) are likely to remain under pressure as in theory the more banks lend the more profit they can make.
It’s the regulatory-fused credit squeeze or lending slowdown that is being blamed for falling house prices and flat bank profits.
Until this credit squeeze reverses bank shares and house prices are likely to move sideways at best.
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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.