MNI DATA ANALYSIS: Australia Housing Soften But Not Widespread

By Sophia Rodrigues

     SYDNEY (MNI) - Housing values in combined capital cities in Australia fell

for the first time since 2012 on a y/y basis due mainly to a fall in Sydney

values which has been on a downtrend for eight months.

     The overall softening in national dwelling values has lasted for seven

consecutive months but remains restricted mainly to Sydney and Melbourne, with

y/y still up 0.2% in April. 

     The Reserve Bank of Australia is watching developments in the housing

market closely but is unlikely to be worried unless the fall is widespread or

exceeds 10% in a city like Sydney.

     The CoreLogic Hedonic Home Value Index for April, published Tuesday, showed

combined capitals index fell 0.3% m/m, leading to 0.3% y/y decline -- the first

since 2012. Combined regional values rose 0.4% m/m and was up 2.4% y/y which

partly offset the decline in capitals values leading to a smaller 0.1% m/m fall

in national index and left y/y at a 0.2% gain.

     According to CoreLogic's head of research Tim Lawless, the latest

developments in the housing market marks a reversal of the trend in the past

five years. "Regional areas are now outperforming the capitals and units are

outperforming houses. Also the most expensive properties are now showing weaker

conditions than the more affordable ones," he said.

     The weaker housing market conditions is mainly a factor of tighter credit

policies imposed by the regulator on the banks which have dampened investment

activity. This is the main reason for weakness in prices in Sydney and to a

lesser extent Melbourne, because investment activity is substantially

concentrated in these two cities.

     However, offsetting this is still low mortgage rates and high overseas

migration which could support a "soft landing" in the housing market, Lawless

said.

     RENTAL CONDITIONS

     Weekly rents nationally are rising at an annual pace of 2.0%, the same as a

year ago but slower than seven months ago when the rise was 2.9%. 

     Developments in the rental market are important because of its contribution

to housing inflation, which has a greater share in overall inflation.

     However, despite the slower pace of rental growth, every capital city

except Sydney, is seeing rents rise at a faster rate than the five-year average.

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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