Australian dwelling price growth is continuing to moderate with the recent CoreLogic data showing that home price growth across Australia has slowed to 7.0% over the year to October (annual price growth was running around 10-11% a few months ago).
Sydney price growth is rolling over (see chart below).
Source: CoreLogic, AMP Capital
Melbourne home price growth is also moderating, but at a slower pace than Sydney because population growth remains strong in Melbourne. The latest population data showed that interstate migration remains very high into Victoria and Queensland (see chart below), which suggests that home buyers are seeking alternatives to Sydney given the general lack of home and land affordability.
Source: ABS, AMP Capital
Home price growth is still negative in Perth, but is picking up pace and Hobart has seen a big turnaround in price growth.
The reasons for slowing prices at the moment are due to tighter lending restrictions on banks and higher mortgage rates to enforce APRA rules around investor lending, affordability pressures in Sydney and Melbourne and a big lift in new supply of dwellings (particularly apartments across the east coast).
These pressures are going to continue in the near-term, particularly with a further lift in new dwellings on the market. So, national home price growth will remain under pressure, especially in Sydney and Melbourne where there is going to be a further big lift in new supply.
While it was necessary to take some steam out of the housing market given the high concentration of investors in the market, slower home price growth is a risk for the consumer spending outlook because households savings have been used up as wealth (related to housing) has boomed.
A rate hike from the Reserve Bank in the near-term would be undesirable, as it would put further downward pressure on dwelling prices at a time when wages growth is still soft.
Under a new scheme, individuals (who've never owned a home) are accessing a portion of their super savings to do so.