Canberra home values have continued to increase steadily, with 1.1 per cent growth in the past quarter and 6.4 per cent growth in the past year, according to new data from property group CoreLogic.
However, they were effectively flat – down 0.1 per cent – in October.
While unit values in Canberra had increased just 2.7 per cent over the past year, house values had grown by 7.7 per cent in the same period, possibly due to a shortage of stand-alone houses in the capital,the report said.
QBE lenders’ mortgage insurance chief executive Phil White said last week Canberra had the highest proportion of units to houses of any Australian capital city, and this had led to a shortage of houses in the market.
Nationally, home value growth in the capital cities has been weighed down by tighter lending by the big banks and easing market conditions in Sydney, with values increasing just 0.4 per cent over the past quarter.
Total national home value growth also slowed, up a mere 0.3 per cent in the October quarter compared to 0.5 per cent recorded in the three months to September.
Mr Lawless said the slowdown in the pace of capital gains was primarily due to tighter credit policies which have fundamentally “changed the landscape for borrowers”.
“Lenders have tightened their servicing tests and reduced their appetite for riskier loans,” Mr Lawless said on Wednesday.
Interest only borrowers and investors are facing premiums on their mortgage rates which are likely to act as a disincentive, especially for investors who are generally facing low rental yields on investment properties, he added.
Hobart was the best performer with dwelling values up 3.3 per cent over the quarter, as investors from Sydney and Melbourne turn to Hobart’s market where housing prices are substantially lower than those in Australia’s largest cities.
The latest report marks the first rolling quarterly fall in Sydney since May 2016 when the first round of tighter borrowing requirements were still working their way through credit policies. It is the second month in a row Sydney prices have retreated after they slid 0.1 per cent in September.
Home values in Darwin and Perth were also down, 4.4 per cent and 0.7 per cent respectively, over the quarter. Melbourne’s market conditions remain resilient compared to Sydney, with home values up 0.5 per cent for the month and reaching growth of almost 2 per cent over the quarter.
CoreLogic head of research Tim Lawless said seeing Sydney listed alongside Perth and Darwin, where dwelling values have been falling since 2014, was a significant turn of events.
Despite the recent downturn in values, Sydney home prices are up 74 per cent since the growth cycle began in early 2012.
Driving Melbourne’s growth is Victoria’s record breaking migration rate which is creating unprecedented housing demand, as well as strong jobs growth and a healthier level of housing affordability, relative to Sydney.