The temperature wasn’t the only thing that chilled during August – home prices across the board also cooled.
Prices in Australia’s capital cities rose only slightly during August, with Sydney’s rampant price escalation also stalling.
CoreLogic reports that the home price index for combined capital cities inched up only 0.1 per cent in August compared to a surge of 1.5 per cent in July with the pace of capital gains slowing in Sydney and Melbourne.
In Sydney, asking prices were flat over August after previously jumping 1.4 per cent the month before. The slowdown is slight comfort for prospective home buyers given that values in the city have risen 13 per cent over the past year to a median of almost $910,000.
Meanwhile the RBA decided to leave the cash rate unchanged at 1.50 per cent. “Housing prices have been rising briskly in some markets, although there are signs that conditions are easing, especially in Sydney,” Governor Philip Lowe reports in his August statement.
In some other markets, prices are declining. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Rent increases remain low in most cities. Investors in residential property are facing higher interest rates. There has also been some tightening of credit conditions following supervisory measures to address the risks associated with high and rising levels of household indebtedness. Growth in housing debt has been outpacing the slow growth in household incomes.
CoreLogic reports that mortgage rates for owner occupiers are generally unchanged. The hold decision will be welcome in markets outside of Sydney and Melbourne where growth conditions have generally been mild to negative.
“Given that a regulatory clampdown on investor lending has taken some of the heat out of the market, now is a good time for prospective buyers interested in owner occupier dwellings to discuss their options,” says State Custodians General Manager Joanna Pretty. “The marketplace is slowing down and there’s increased listings in certain areas so things are looking up for buyers.”
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