Housing - The Broader Picture


Capital city housing markets remain extremely diverse. Home values have recorded strong growth over the past year in Sydney and Melbourne, and moderate growth in Brisbane and Canberra. Values fell across the remaining capital cities.

The diversity in the housing market highlights the different growth drivers that are evident from region to region.

Outside of the capital cities, regional markets linked to the resources sector are generally seeing home values and transactions fall. Conversely, coastal and lifestyle markets are bouncing back, with both values and buyer demand generally lifting.

The diversity in the housing market highlights the different growth drivers that are evident from region to region. Sydney and Melbourne’s economies are relatively protected from the downturn in the resources sector and are benefiting from a healthy services sector and positive population inflows.

In contrast, the mining states and territories are experiencing softer economic conditions and a drop in population growth.

Investor demand slows slightly

September figures from the Reserve Bank of Australia show credit for investment housing increased 10.7% over the year, down from a recent peak in growth of 11.1% in June. The Australian Prudential Regulation Authority has mandated a 10% growth p.a.

With many banks now placing a premium on investment mortgage interest rates and also increasing serviceability limits on all mortgages, a cooling in investment housing demand may be starting to emerge.

While investor demand appears to be slowing, credit growth to owner-occupiers appears to be rising, as many banks switch their focus to this market segment.

Will Sydney and Melbourne housing market conditions ease?

The cumulative effect of tighter lending conditions, more expensive mortgage rates for investors and lower yields, as well as natural affordability constraints and higher levels of new housing supply, is likely to calm Sydney’s housing market. It should have a similar impact on housing demand in Melbourne.

Auction clearance rates have been trending lower in Sydney and Melbourne over the past couple of months. Is this a sign? Although CoreLogic anticipates that value growth will continue, it expects that the rate of this growth is starting to slow in Sydney.

Ref: CoreLogic RP Data