Sydney’s home value slide continues

Sydney housing prices have fallen by 2.4 per cent in the past three months, dropping by 0.6 per cent in February following consecutive declines of 0.9 per cent in December and January, CoreLogic’s February Home Values Index has reported.

Dwelling values in Sydney have slipped into negative annual change for the first time since 2012, dropping by 0.5 per cent in the last 12 months and by 3.7 per cent since the price peak of July 2017.

Darwin’s home values experienced the second-largest decline over the last quarter, falling by 2.0 per cent, followed by Perth (0.7 per cent), Melbourne (0.4 per cent), Canberra (0.2 per cent), and Brisbane (0.1 per cent).

Hobart’s housing values experienced the greatest growth, rising by 3.2 per cent in the past quarter and 13 per cent annually, while Adelaide’s home values also increased slightly by 0.1 per cent in the three months ending 28 February.

Despite national home values dropping by 0.8 per cent in the past quarter, CoreLogic’s head of research, Tim Lawless, believes that home values could be stabilising.

“Overall, the housing market has continued to see soft conditions resulting in some slippage in housing values,” the research head said.

“However, the rates of decline have flattened out over the second half of February. 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.”

Moreover, Mr Lawless expects demand for home loans to drop, with household debt levels at a record high.

“With high levels of household debt and dwelling values now starting to fall as well as tighter credit policies and a prospect of higher mortgage rates down the track, it is reasonable to expect that borrowers will be taking a more cautious approach to taking on debt,” the expert continued.

Further, the head of research claimed that macro-prudential measures imposed by the Australian Prudential Regulation Authority (APRA) have “removed the heat” from the housing market. Thus, he expects housing market conditions to remain sedate.

“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. 

“The reversal in capital gains has been mild to date, a clear sign that macro-prudential measures have removed the heat from the market in a very controlled manner.”

[Related: FHBs urged to ‘wait on the sidelines’]