House prices in Australia are continuing to show signs of cooling, as out-of-cycle rate hikes from the big four banks and a regulator crackdown on loose lending starts to curb the speculative property bubble in the major cities.
Property prices slipped in five of the eight Australian capitals, which dragged the combined capital cities price index 1.5 per cent lower over November, according to figures from CoreLogic RP Data.
Sydney home prices fell 3.5 per cent while in Melbourne values depreciated 1.4 per cent.
CommSec economist Savanth Sebastian said it was the biggest slide for Sydney home prices in five years.
“But keep in mind Sydney home prices are still up almost 13 per cent over the year,” Mr Sebastian said. “A mild correction in property prices, particularly in Sydney and Melbourne, is a good thing.”
The slide in capital city home prices in November marked the first fall in six months and the biggest slide nationally in 18 months.
CoreLogic RP Data head of research Tim Lawless said slower housing market conditions for Sydney and Melbourne became evident earlier in the year and continued throughout November.
The fresh figures leave the Australian property price index down a total 0.5 per cent for the three months through November. Meanwhile, the annual rate of growth across the capital cities has pared back from peak of 11.5 per cent in April last year down to 8.7 per cent currently.
“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," Mr Lawless said.
Tighter mortgage servicing criteria across the board and affordability constraints in the Sydney and Melbourne markets are also having an impact on market demand," he said.
An APRA-led crackdown on investor lending has seen the share of investor participation in the housing market fall to a two-year low of 45.4 per cent at the end of September, down from 54.1 per cent in May.
On the other end of the spectrum, Adelaide property prices gained 0.7 per cent during November, while Brisbane rose 0.6 per cent.
Ahead of this afternoon's Reserve Bank board meeting, Mr Lawless said the slower housing market conditions will likely be a topic of conversation for the central bank.
"A less buoyant housing market is likely to provide the Reserve Bank with a greater degree of flexibility in adjusting interest rates without as much risk of overstimulating the housing market," Mr Lawless said.
"While the Reserve Bank is likely to welcome a slowdown in the rate of home value appreciation, the overriding objective would be to avoid a significant downturn in the housing market, which would act as a weight on economic growth and potentially impact financial system stability.”