Housing growth sinks to lowest level in 31 months

Property markets are coming off the boil, but no sudden plunge ahead

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published April 1, 2016 12:01 pm AEDT

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.

Automatic Renewal

By taking up this offer, you will also be enrolled in our auto-renewal program, which is our way of making your ongoing subscription easier by ensuring uninterrupted service. Don't worry, though – you're not locked in, and can cancel your auto-renewal at any time before each 'anniversary' date without question or penalty.