Combined values were flat in October across both capital cities and regional areas, according to CoreLogic’s Home Value Index.
Head of research Tim Lawless said that the movement can be attributed to tighter credit policies.
“Lenders have tightened their servicing tests and reduced their appetite for riskier loans, including those on higher loan-to-valuation ratios or higher loan-to-income multiples,” Mr Lawless said.
“Additionally, interest-only borrowers and investors are facing premiums on their mortgage rates, which are likely to act as a disincentive, especially for investors who are generally facing low rental yields on investment properties.
“In fact, the peak rate of growth in dwelling values lines up closely with the peak growth rate for investment lending in late 2016.”
Mr Lawless said that the market responded similarly through 2015 and early in 2016.
“Of course, housing market conditions rebounded swiftly through the second half of 2016 once the investment-related credit limits were achieved and the cash rate was adjusted lower in May and August last year.”
While most of the broad regions are experiencing a slowdown in the rate of capital gains, only three capital cities have recorded outright negative value growth in the three months ending October: Sydney (-0.6 per cent), Perth (-0.7 per cent) and Darwin (-4.4 per cent).
Melbourne still strong
Melbourne’s market remains stronger than Sydney’s as values were 0.5 per cent higher over the month to be up by 1.9 per cent over the rolling quarter.
Mr Lawless said that this is because of Victoria’s “record-breaking” migration rate.
“Despite the stronger growth profile, Melbourne dwelling values are now rising at their slowest quarterly pace since mid-2016,” Mr Lawless said.
But the head of research was quick to point out that other markets are showing very different trends.
He said that Hobart continues to be the strongest capital city, with values pushing 0.9 per cent higher in October.
“Hobart is benefitting from renewed housing demand in the form of interstate migration, particularly Sydneysiders and Melbournites who appear to be utilising their enhanced wealth positions to buy very well in Hobart, where housing prices are substantially lower than those in Australia’s largest cities.
“Brisbane and Adelaide remain relatively subdued, with Adelaide dwelling values unchanged in October while Brisbane values were only 0.2 per cent.”
Mr Lawless also said that the two toughest markets, Perth and Darwin, are showing a further divergence in their performance.
He said that values moved sideways in Perth over the month, and that the trend in Darwin has been discouraging.
The index also found that unit markets are generally underperforming relative to houses, except in Sydney.
Mr Lawless said that the performance across product types is very different from city to city. Some cities — such as Brisbane, Adelaide, Darwin, Canberra and, to a lesser extent, Melbourne — are showing a “substantial” performance gap between houses and units.
“The underperformance of the unit sector in these cities likely relates to higher supply levels relative to demand and less challenging affordability constraints which is supporting demand across the detached housing sector.
“The Sydney unit market is slightly outperforming the detached housing sector, with an annual growth rate of 7.9 per cent for units compared to a growth rate of 7.7 per cent for houses.
“While Sydney is seeing a large number of new units added to the market, it seems that high levels of investment activity and strained affordability is helping to drive a better performance across this sector.”