Sydney and Melbourne lead April drop in home values

The CoreLogic Home Values Hedonic Index revealed that combined capital city dwelling values dropped by 0.3 per cent, with national home values also declining by 0.1 per cent, offset by a 0.4 per cent rise in regional home values.

Hobart reported the largest home value increase (1.2 per cent), followed by Canberra and Darwin (0.6 per cent), and Adelaide (0.1 per cent). Property prices in Perth remained stable over the month of April.

Sydney’s median home price remains the highest ($875,816), followed by Melbourne ($720,433), Canberra ($594,486), Brisbane ($492,911), Perth ($464,238), Adelaide ($435,042), Darwin ($433,609) and Hobart ($430,138).

In the 12 months ending in April 2018, national dwelling values dropped by 0.2 per cent, reporting negative annual growth for the first time since November 2012.

CoreLogic’s head of research, Tim Lawless, attributed the housing market slowdown to the decline in the flow of investor credit, but he noted that the value fall has been offset by growth in owner-occupied lending, driven by demand from first home buyers.

“Weaker housing market conditions are primarily a factor of tighter credit policies which have dampened investment activity. Annual growth in investor housing credit was just 2.5 per cent over the 12 months to March ’18,” Mr Lawless said.

“Considering investment activity has been substantially concentrated in Sydney and, to a lesser extent, Melbourne, it makes sense that these two markets would feel the brunt of tighter credit conditions for investment lending.

“The slowdown in investment activity has been partially offset by a uptick in owner-occupier lending, driven by a surge in first home buyer activity in NSW and Victoria. Annual growth in owner-occupier housing credit, at 8.1 per cent over the 12 months to March ’18, is the fastest pace of growth since late 2016.”

However, Mr Lawless claimed that the Australian Prudential Regulation Authority’s (APRA) recent decision to remove the 10 per cent cap on investor lending growth would not lead to uptake in the flow of credit.

“With the recent announcement by APRA that the 10 per cent speed limit on investment lending would be lifted from 1 July for lenders who can prove they have met ARPA guidelines over the past six months, it would be intuitive to assume investment activity may lift; however, that isn’t likely to be the case,” the research head added.

“In fact, borrowers may face tighter lending conditions as banks focus more on debt servicing and ensuring expenses are more comprehensively assessed and adequately allowed for.”

The CoreLogic analyst also said that he believes a reduction in Australia’s migrant intake would reduce demand for housing.

“Increasingly, there is talk about reducing Australia’s migration intake. Should this occur, it would likely result in reduced demand for housing, particularly in NSW and Victoria which see the strongest levels of overseas migrant arrivals,” Mr Lawless said.

'First homes buyers risk missing out if they don’t make the leap soon'

Indeed, Marion Mays, CEO of property investment mentoring firm Thalia Stanley Group, noted that more clients were gravitating towards buying in Melbourne over Sydney. 

“Melbourne is offering up prime locations, competitive prices and investment options that seem to have Sydney beat,” she said

“I now have Sydney-based clients eager to buy in Melbourne, which is something I have seldom experienced before,” she adds.

Ms Mays highlighted that some industry insights and news have been predicting a 3.6 percent growth nationally into 2019 – with Melbourne expected to outperform the rest of the country over the coming twelve months.

However, she highlighted that housing affordability is getting worse and that investors looking to buy their first property should act soon: “For those considering entering the property market, there is no better time. However, first homes buyers risk missing out if they don’t make the leap sooner rather than later," she said.

“It’s a matter of urgency, opportunity and knowing where to buy – those that wait (even just six months) may find they have missed their window."

She advised: “Thorough research and due diligence are definitely the key factors to ensuring [an] investment will bring the desired returns.

"More often than not, one of the biggest mistakes made by investors is buying on a whim. While fast action or fear of missing out are strong motivators, cutting corners and not seeking expert advice before you buy is a sure way to make costly mistakes,” Ms Mays concluded.

[Related: Sydney’s property prices continue to moderate]