Home Agents & Agencies Adelaide second strongest as April sees worst monthly growth since December 2015

Adelaide second strongest as April sees worst monthly growth since December 2015


Written by Stefan Kostarelis

Home prices in Australia’s major cities dropped off in April as policymakers and the public continue to be alarmed at the possibility of a bubble.

CoreLogic released its index of home prices for April, showing that combined capital cities rose just 0.1 percent last month, making it the weakest month-on-month rise since December 2015.

“The two hottest housing markets in the nation have shown signs of slowing down in April,” said Head of CoreLogic Research Tim Lawless, referring to Sydney and Melbourne.

“The moderation in growth was due largely to a slightly negative April result in Australia’s largest capital city housing market, Sydney, where dwelling values were broadly flat (rounded up from -0.04%) over the month.

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“The result for Melbourne was also lower than previous months of 2017, with dwelling values up 0.5% over the month,” he added.

Hobart had the strongest month, showing growth of 1% percent while Adelaide was second at 0.8%.

Based on the rolling quarterly change in dwelling values, Hobart again posted the highest growth, with home values rising 5.1% in the past three months. For the quarter, Adelaide continued its reputation as safe bet investment, with conservative gains of 2.2%.

Meanwhile, despite a slow April, Sydney and Melbourne posted 4% and 3.9% quarterly values respectively, putting them in second and third. Year on Year, the two cities have grown a blistering 16% and 15.3%, which has been the primary catalyst for talk of the “b-word”.

At the other end of the scale, Perth’s change in dwelling value was -1% for April and -2.4% for the quarter. Darwin is also struggling, posting growth of 0.5% for April and -0.9% for the quarter.

Last month, investment bank UBS called the peak of the Australian housing market and predicting a correction rather than a collapse.

However, Mr Lawless said, “We need to be cautious in calling a peak in the market after only one month of soft results”.

“April, in particular, coincides with seasonal factors including Easter, school holidays and ANZAC Day long weekend.

“The softer results should also be viewed against a backdrop of an ever evolving regulatory landscape which is firmly aimed at slowing investment and interest-only mortgage lending,” he added.

If the “softening” is to continue, it will demonstrate that measures taken by regulators in recent months are successfully cooling the property market.

By March of this year, Australia’s Big Four banks had all increased home loan rates to kerb risky lending.

“The higher cost of debt, as well as stricter lending and servicing criteria, has likely dented investment demand over recent months.” said Mr Lawless.

The RBA cut interest rates to a record low of 1.5 percent last August but decided to leave it there, warning that further easing would only encourage more borrowing from indebted households.

The meteoric rise in house prices, particularly in Sydney and Melbourne, has dashed the hopes of many first-time buyers and become a much-debated political issue.

Treasurer Scott Morrison is due to hand down the federal budget on May 9th and has said that he is working on a package that will deal with the challenges in housing affordability.

The Malcolm Turnbull government has repeatedly labeled the surge in prices as a “supply issue”.

However, economist Lindsay David conducted a state-by-state analysis of housing supply and found that in Sydney and Melbourne, properties are built at a faster rate than population growth.

Mr David told ABC News that speculative investors are fueling the property market and that additional supply would only encourage more people to put their savings into the market, pushing prices even higher.

“When you’re in the pit of an irrational exuberance it doesn’t matter how many new dwellings you build,” he said.