According to the latest Domain House Price Growth report, Sydney’s median house price grew by only 3.2% over the September quarter, the slowest rate of quarterly growth since March 2014.
According to the report, the median price for a house in Sydney is $1,032,433, while the median unit price is now $673,182 after it grew at just 1.5% over the quarter – well down on the 7.4% growth seen during the June quarter.
“It’s still a good result for owners in Sydney, but I think it’s clear now that the boom in price growth we’ve been seeing is receding,” Domain Group senior economist Dr Andrew Wilson said.
“House price growth over the September quarter was well below what we saw in June. It’s actually less than half than the June quarter growth and it looks like growth will be lower again over the December quarter,” Dr Wilson said.
Dr Wilson said there have been a number of signs recently pointing to a slowdown in price growth.
“We’ve seen a sharp decline in auction clearance rates recently which is a pretty good forward indicator, and also we’re starting to see interest rate increases that will offset any decreases by the RBA,” Dr Wilson said.
“Look, prices will continue to grow and it’s quite rational to say they will be higher this time next year, but it’s not going to be at the same level we’ve seen in recent years. A lot of the energy that came from the February and May rate cuts has now washed through the market and people simply don’t have the capacity to keep buying.”
In Melbourne, a similar slowing of capital growth rates appears to be occurring.
The Melbourne median house price increased by 2.8% over the September quarter, pushing the median house price above $700,000 for the first time, but that level of growth is well below the 6% recorded over the June quarter.
While investors can no longer expect the same strong levels of capital growth they have been experiencing in Sydney and Melbourne, Dr Wilson said there was also some worry for Brisbane, which has been touted by many as the next investment hotspot.
“Brisbane has been disappointing, it was predicted to grow just behind Melbourne but that’s just not happening.
“It’s doing nothing like it was predicted. Growth looks like it could be below last year’s level and it’s just really going sideways with no direction or momentum.”
The current economic situation in Brisbane and Queensland in general is having a negative effect on the city’s market. Wilson said.
“It’s suffering because of the economy, people talk about Perth and Darwin being affected by the resource slowdown, but that’s having an effect in Brisbane and Queensland too.
“The lower priced outer suburban areas are still struggling, and even the inner city suburbs that had been doing relatively well have hit a bit of a pause.”
While Dr Wilson said Brisbane is going sideways, it’s likely there’s more downward movement for Perth and Darwin.
“I’m not sure we’ve found a bottom for those two markets yet,” he said.
“They’re a perfect illustration of what’s happening as the economy transitions from being driven by the resource sector to whatever will be next and it’s not likely they’re going to see any growth over the next year at least.”
The remaining capital cities, Canberra, Adelaide and Hobart, all saw relatively modest capital growth rises during the September quarter; however, the report predicts house prices in three cities are on track to see higher yearly rates of house price growth.