House price growth struggles in March quarter

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The opening quarter of 2016 has been a sluggish one for Australia’s property market, with home prices falling across the majority of capital cities in the three months to March.

Released this week, the March quarter Domain House Price Report has revealed that the combined capital city median house price dipped 0.5% to $719,024 during the three-month period.

Over the same period, the combined capital city unit price fell 1.1%.

In the year to March house prices in Australia have risen 6.2%, while unit prices have increased by 3.4%.

For the housing market, only Melbourne (1.2%) and Hobart (4.3%) saw growth over the quarter, while unit prices dropped in all markets except Adelaide where prices remained steady.

For Sydney, the March quarter saw house prices fall 1.5%, bringing the median house price back under $1m at $995,804 and makes it two successive quarters of price falls in the city.

The March fall now means house prices in Sydney are falling faster than they were during the GFC and could have fallen further if not for the performance of a select few pockets.

“We’re recording a 4.7% fall over the past two quarters and that’s just above the 4.6% fall that was recorded over the entire year of 2008 when we had four consecutive quarters of falls during the GFC,” Dr Wilson said.

“We’ve got a bit of a mixed market in Sydney at the moment. It’s really the inner-suburban higher priced areas that are holding the market up. There’s been very strong growth in the lower north, particularly the lower north over the quarter,” he said.

“Really, if it wasn’t for that we would’ve had a sharp decline in prices. Those prestige areas have really activated this year and I think a lot of that is because they were definite underperformers during the boom.”

While Sydney’s blue-chip stock may have been performing well, Wilson said there are signs that growth is beginning to wane in those areas and it is likely price growth will continue to flatten across the city in 2016.

Sydney’s unit prices also fell for the second consecutive quarter, down by 0.7% to $656,166.

In Melbourne, the March quarter’s 1.2% increase to Median house price of $726,962 gave the city 14 straight quarters of house price growth and Dr Wilson said it easily holds the mantle of the nation‘s strongest market, though growth will be relatively subdued this year.

“Melbourne was quite modest, but it has now grown 14 quarters in a row. It’s a quietly confident market,” he said.

“I think that it’s a market that’s remarkably stable at the moment and given that, I think the prospects for Melbourne are that it’s likely to be the leading market this year.

“I think that it’ll really struggle to record prices growth of over 5% for the year, which will be about a third of what it grew last year.”

Melbourne unit prices fell by 1.7% over the March quarter to $444,370, which Dr Wilson said was continual evidence of the impacts of oversupply.

Dr Wilson said Brisbane’s unit market, which saw price falls of 0.8% in the quarter and 3.2% in the year to March is having similar problems with over supply, but unlike Melbourne its housing performance has been disappointing given the high hopes many held for the city.

Brisbane house prices fell marginally over the March quarter for the first decrease since the September quarter 2014, with a median price of $512,809, with migration and the Queensland economy acting as a handbrake.

“There’s some issue in Brisbane that are clearly structural. The first is that there’s continuing problems with the local economy, we’ve seen the unemployment rate for Queensland ticking up over 6% and that’s a key factor in keeping price growth flat.

“The other point is that we’ve seen a significant decline in migration into south east Queensland. It’s at very low levels at the moment.

“Migration has been a key driver of property markets in south east Queensland and the end of the resources boom plus very strong economies in Melbourne and Sydney are keeping that migration around the southern states.”

In Hobart the median house price now sits at $360,212, up 7.6% in the past 12 months as the Tasmanian capital plays catch up.

“Hobart is clearly in catch up mode, the median is still under $400,000 after a period of subdued growth.  It’s really activated buyers on the basis of good value opportunities under $400,000 and I really think investors are getting a bit more interested.

“Rents are growing for houses and vacancy rates are the lowest in the country and the yields are the highest. With such a low entry point, it’s always a bit of head scratcher as to why there’s not more investment activity in Hobart, but of course the local economy is the key.”

In Perth the March quarter saw another price fall, but Dr Wilson said it may be starting to recover.

“The big issue in Perth is the local economy. There are some good signs with a sharp decline I unemployment over March and that’s going to be the beginning of the journey back

“It’s always going to be a question of two forward and one back, but I do think Perth has a chance of finishing in the black by the end of this year.”

Over the quarter, Perth’s house price fell 1.3% to $579,914.

In Adelaide, the median house price fell 0.5% to $491,422, while unit prices remained at $303,537.

Canberra’s median house price fell 1.4% to $638,696 and units dropped 2.8% to $400,637.

Darwin’s median house price slipped 4.9% to $610,305 and its units fell 4.1% to $448,416.  

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