By: Wayne Cole
SYDNEY: Home prices across Australia’s major cities fell for a fifth straight month in February as tighter rules on investment lending chilled the once red-hot Sydney market, a relief to regulators but a weight on consumer spending power.
Property consultant CoreLogic said on Thursday its index of home prices for the combined capital cities slipped 0.3% in February after it fell 0.5% in January.
Annual growth in prices slowed to 2.0 percent, from 3.2 percent in January and 10.5 percent in the middle of 2017.
Prices in Sydney dropped 0.6 percent in February, leaving values down 0.5 percent on the year for the first negative reading since 2012. Values had been surging at more than 20 percent a year at the peak of the boom.
Melbourne has fared better, with prices dipping 0.1 percent in February but still 6.9 percent higher for the year.
Home prices outside the major cities edged up 0.4 percent in February to be 2.8 percent higher on the year. Combined, prices across the nation eased 0.1 percent in the month and were up 2.2 percent for the year.
CoreLogic head of research Tim Lawless noted activity in the housing market had picked up in the second half of February, with the rate of price declines slowing.
“The next couple of months should provide a much clearer picture as to whether the falls are set to continue, or if the market is in fact stabilising,” said Lawless.
“Considering the tighter credit environment, the eventual prospect of higher interest rates and ongoing housing affordability constraints, we expect housing market conditions will remain sedate relative to previous years,” he said.
The cooling has been very much desired by Australia’s bank watchdog. It tightened standards on investment and interest-only loans, leading banks to raise rates on some mortgage products.
The Reserve Bank of Australia has also been concerned that debt-fuelled speculation in property could ultimately hurt both consumers and banks.
The inexorable rise of prices in the major cities had put homes out of the reach of many first-time buyers and had become a political hot potato.
Yet the boom has also been a boon for household wealth, with the government statistician estimating that housing stock is worth a cool A$6.8 trillion ($5.5 trillion) – four times the size of annual gross domestic product.
The explosion in wealth had helped offset weakness in wages, so a sustained downturn in home prices could now act as a drag on consumer confidence and spending. (Editing by Paul Tait)
Source: Reuters