Australia’s Property Market Is Beginning to Cool, Led by Sydney

(Bloomberg) -- Sydney home prices fell for a second straight month and home lending eased, adding to signs that Australia's property boom, fueled by ultra-low interest rates, is losing momentum.

The nation's most populous city recorded a 0.2% drop in March, while prices in Melbourne slipped 0.1%, CoreLogic Inc. said in a report Friday. Although prices are still advancing across the country, the 0.3% monthly gain for the country's eight major cities was the equal lowest since October 2020.

Separate government data showed both the value and number of home loans slid in February, with new home loan commitments dropping 3.7% to A$32.3 billion ($24.2 billion), down from a record high the previous month.

Sydney's Frothy Housing Market Is Showing Signs of Turning Down

Australia, like a number of developed economies, recorded significant property market gains through the pandemic as the central bank cut rates to near zero to prop up the economy. But rising expectations of policy tightening in the months ahead is beginning to cool buyer ardor.

Housing affordability has also become a significant issue, with income growth trailing well behind property-price gains: between March 2020 and December 2021, wages increased 3.3% compared with a 22.6% lift in dwelling values.

Australia's Soaring Property Prices Drive Wealth to Record High

“Virtually every capital city and major rest-of-state region has moved through a peak in the trend rate of growth,” said Tim Lawless, CoreLogic's director of research. “The sharpest slowdown has been in Sydney, where housing prices are the most unaffordable, advertised supply is trending higher and sales activity is down over the year.”

The median home value in Sydney is now more than 17 times the median salary in the country.

What Bloomberg Economics Says...
“As the economy recovers from the omicron hit in the first quarter and borders reopen, investor demand could pick up. That could potentially boost prices for multi-family units, which have lagged detached house prices.”
-- James McIntyre, economist.
For the full report click here.

Sydney's growth rate eased to 0.3% in the first quarter of 2022 from a peak of 9.3% in the three months through May 2021, the data showed. One bright spot was regional Australia, where values rose 1.7% in March.

Overall, national home values have climbed 18.2% over the past 12 months, after reaching a “cyclical high” of 22.4% in January 2021, the report showed.

National housing turnover is also cooling, with preliminary transaction estimates for the first quarter tracking 14.3% below the same period last year.