Why’s the heat coming out of capital city property markets?
Capital city property markets have seen some unusual trends emerging over the past few weeks, as prices have started to fall in some of the most sought-after locations.
The CoreLogic November Home Value Index revealed that five out of eight capitals saw a monthly drop in dwelling values, the most pronounced of which being in Melbourne. The Victorian capital saw its prices decline 3.5 per cent while in Sydney, they were down 1.4 per cent from October levels.
Hobart, Darwin and Canberra made up the rest of the list, with falls of 2.4 per cent, 1.3 per cent and 0.5 per cent respectively.
So what exactly is it that’s causing this impact on Australian real estate? And is it likely to lead people to go in search of homes for sale elsewhere in the country?
Home loan rates play a part
The official cash rate has been at its all-time low of two per cent since May this year, and there were high hopes this would have a positive effect on the property market. However, CoreLogic RP Data’s head of research Tim Lawless explained that this hasn’t been the case.
October saw a surge in the number of available homes for sale.
“The fact that mortgage rates have risen independently of the cash rate has, in all likelihood, become a contributor to the slowdown in housing market conditions, as well as tighter lending practices evidenced by a recent reduction in lender risk appetite for investment loans and high loan to valuation ratio mortgages,” he noted.
There’s unlikely to be any respite soon, either, as the Reserve Bank of Australia (RBA) has already made its final cash rate decision of the year. At its meeting on 1 December, the RBA opted to leave rates on hold, which could have a further impact on demand for home loans.
More homes are available
October saw a surge in the number of available homes for sale and although November’s result was slightly more subdued, it also contributed to the issue. SQM Research revealed that Adelaide, Melbourne and Canberra all saw more properties being made available for purchase.
As more homes are put up for sale, price pressure should start to ease. SQM figures show there are now 11.8 per cent more properties available in Sydney than there were 12 months ago, which will have had an impact on values.
No matter whether you have your eye on real estate in a sought-after capital or somewhere more remote, be sure to get in touch with your local Ray White office. With a presence throughout Australia, we can help you realise your ownership ambitions.