A day after warnings from the Reserve Bank about the booming property market, new figures show that price growth is slowing in capital city markets.
Domain Group released its State of the Market Report for spring on Thursday which predicts that Sydney’s median house price will lift between 5 and 7 per cent this financial year, about half the growth of the previous financial year. The prediction for Melbourne is 3 to 5 per cent after a 9.3 per cent lift last financial year.
A rise of 3 to 5 per cent is expected for Perth and Adelaide, with a 2 to 3 per cent lift in Canberra. Domain’s forecast for Queensland will be released in a few weeks.
Reserve Bank governor Glenn Stevens’ warning about low interest rates inspiring “financial risk-taking behaviour” that could cause “nasty shocks” for the economy – and ANZ chairman David Gonski’s statement that “there will come a time when there will be a correction” – came in the wake of researcher RP Data releasing figures showing capital cities had their strongest winter since the lead-up to the financial crisis.
RP Data had said Sydney values grew 5 per cent over the three months to the end of August. In Melbourne it said prices grew 6.4 per cent.
But Domain Group’s senior economist, Andrew Wilson, pointed to the Fairfax-owned researcher’s figures which showed just five-and-a-half per cent over the first half of this year for Sydney. Its Melbourne figures were just a 2.2 per cent rise over that period.
Despite Mr Gonski’s concerns of a correction at an unspecified time, Dr Wilson does not hold such fears.
“The only correction would be caused by a significant fall in affordability which would either be a signficant rise in interest rates – which is certainly not on the cards – or a significant externally driven economic shock,” Dr Wilson said.
“Typically Australian house prices have have robust growth phases followed by orderly correction phases.
“Prices growth has certainly moderated in Sydney and prices growth has moderated in the capital cities that were the strongest performers last year.”
Dr Wilson said there had been insufficient wages growth to support the same levels of capital growth as last year.
Speaking particularly about the extraordinary price growth over winter in Melbourne – outstripping Sydney – Richard Wakelin of Wakelin Property Advisory said he believed that RP Data had “understated the strength of the market earlier in the year” and “they’ve been playing catch-up”.
“Our sense on the ground has been that the market isn’t as volatile as the data out there suggests.
“Prices have moved steadily up over the year rather than zigzagged around.”
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