Housing market shows signs of cooling

The latest RP Data CoreLogic Home Value Index posted a 0.1 per cent capital gain across the combined capital cities last month.

RP Data’s research head Tim Lawless said a moderating annual trend, as well as the relatively flat September result, is likely to be welcome news to policymakers and potential buyers after the winter months recorded the largest capital gain since 2007.

“The softer September result is also likely to be seen as a positive indicator by the Reserve Bank which has recently raised concerns about the level of value growth and speculative investing in the Sydney and Melbourne housing markets,” he said.

“Since the beginning of 2009 we have seen Sydney values increase by approximately 51 per cent and Melbourne values by almost 45 per cent. Across the state capitals, the next highest capital gain over this period has been Perth, where values are up 14.5 per cent.”

The Reserve Bank has recently singled out Sydney and Melbourne as markets that require some caution.

Mr Lawless noted that the current growth phase isn’t as aggressive as what was recorded over previous cycles. 

“At their peak, on a rolling annual basis, capital city dwelling values increased at a faster pace over each of the previous three growth cycles in 2009/2010, 2007 and 2001/2003,” he said.

“The big difference over this cycle is that growth has been very much concentrated within the nation’s two largest capital cities and has increased for a longer period than the previous two growth phases.”

Mr Lawless said what is of most concern is the ratio of housing debt to disposable income, which has reached a record level at 137.1 per cent.