Capital city home values fell by 0.2 per cent in March, with Sydney experiencing the sharpest decline (0.3 per cent), according to CoreLogic’s March Hedonic Home Value Index.
Combined capital city dwelling values have dropped by 0.9 per cent over the past quarter and 0.8 per cent in the last 12 months.
The median value of properties in the capitals is now $655,630.
The capital city price slump was led by a sharp reduction in Sydney’s home values, which fell by 1.7 per cent over the past quarter and 2.1 per cent year-on-year. The median value of property in the NSW capital is now just over $878,000.
Adelaide’s property values also declined by 0.3 per cent in March, closely followed by a 0.2 per cent fall in Melbourne’s.
AMP Capital’s head of investment strategy and chief economist, Shane Oliver, attributed the continued fall in dwelling values to tighter lending conditions and cooling demand from both domestic and foreign buyers.
“The combination of reduced lending to investors and interest-only borrowers following pressure on the banks last year from APRA to tighten lending standards along with tougher restrictions on foreign buyers, rising supply and more realistic price expectations by buyers are all clearly working to slow the previously booming Sydney and Melbourne residential property markets,” Mr Oliver said.
“FOMO (fear of missing out) looks dead for now.”
Mr Oliver also expects home values in Sydney and Melbourne to drop a further 5 per cent in 2018 as banks implement stricter landing standards.
“Our assessment is that a further tightening in lending standards as banks get tougher on borrower income and living expense levels along with the ongoing rise in supply and more realistic capital growth expectations by home buyers will see Sydney and Melbourne property prices fall another 5 per cent or so this year,” the economist said.
“However, with population growth remaining strong, a property crash remains unlikely in the absence of much higher interest rates, much higher unemployment (both of which are unlikely) or a continuing surge in supply.”
Despite price drops in three of Australia’s capital cities, dwelling values rose in Hobart (1.7 per cent), Darwin (1.0 per cent), Perth (0.3 per cent), Canberra (0.2 per cent) and Brisbane (0.1 per cent).
[Related: More properties selling for over $1m]