House prices grind to a halt in October
Nov 2, 2015
Jennifer Duke. Domain.com.au
The days of house prices soaring month-on-month appear to be over.
Property price growth flat-lined over October and not even an interest rate cut on Tuesday is likely to revive the momentum, experts say.
Capital city property prices increased by just 0.2 per cent during the month, up 1.4 per cent over the quarter, according to CoreLogic RP Data.
In Sydney, prices were up 0.3 per cent over the month and 1.5 per cent over the quarter, with Melbourne pushing past – up 0.6 per cent over the month and 3.1 per cent over the quarter.
At the same time, clearance rates in Sydney and Melbourne fell to their
lowest levels over the year, Domain Group senior economist Andrew Wilson said.
The clearance rate declined to an average 62.3 per cent in Sydney and 70.3 per cent in Melbourne, with both seeing significant numbers of spring vendors flooding the market.
“Recent announcements by banks of higher mortgage rates will also impact buyer confidence, with clearance rates to continue to track backwards in Sydney and Melbourne although results in other capitals will remain largely stable,” Dr Wilson said.
Westpac hiked its interest rates for all variable rate borrowers in mid-October, recently followed by the other big three banks.
This hasn’t been the only disincentive over the month for investors and home buyers, CoreLogic RP Data head of research Tim Lawless said.
“We are also seeing approximately a 30 per cent premium on investment-related mortgage rates, tighter lending standards and borrowers generally requiring a larger deposit,” Mr Lawless said.
With the high price of Sydney property and record high housing construction, record low gross rental yields prove a further disincentive to investors.
“Investors are already paying higher mortgage rates, coupled with the growing acceptance that the growth cycle is peaking out at a time when rental income is at a record low which doesn’t reflect healthy investment fundamentals in these cities,” he said.
Melbourne and Sydney’s gross rental yields for houses and apartments are the lowest in the country, at 2.9 and 3.1 per cent respectively, with both recording a 4.1 per cent rental yield for apartments.
AMP Capital chief economist Shane Oliver said there had been a few soft periods during the past boom but now it seemed more likely this slower patch “would stick”.
“Not only has price momentum declined, but housing finance figures and auction clearance rates are showing a slowdown,” Dr Oliver said.
“An interest rate cut would possibly reignite things, but the slowdown was under way before Westpac increased their rates,” he said.
He said Sydney was in for a period of slower price growth before declines, with falls of up to 10 per cent expected in 2017.
