Tighter credit puts squeeze on property in the big two cities, with NSW capital down 4.5%

This article is more than 2 years old

This article is more than 2 years old

Tumbling house prices in Sydney and Melbourne are the main drivers behind the first annual drop in national property prices in six years, a new report shows.



The national median house price fell 1.0% over the June quarter and year, according to a report by the property classifieds group Domain on Thursday. It is the first time values have fallen on an annual basis since June 2012.

The negative national growth rate reflects weakening house prices in Sydney and Melbourne, which together represent about two-thirds of Australia’s housing market by value.

Sydney house prices fell by 4.5% in the 12 months to the end of June for their largest annual drop since 2008. Sydney units also fell by 3.5% over the same period.

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The figures chime with those released this week by the property data firm CoreLogic, which said overall Sydney prices fell 5.0% in the 12 months to 22 July.

“House and unit prices in Sydney are now back to values seen at the end of 2016,” the Domain property analyst Dr Nicola Powell said.



Tighter credit availability and a high number of units being built are key factors behind the dive, Powell said.

“With more choice and less urgency, there are fewer active buyers in the market, and those who are in the market are being restricted by tightening lending standards and the availability of credit.”

Banks have been forced to tighten lending over the past two years, especially for investors, and the industry has also become more risk averse after its lax standards came under fire at the banking royal commission. Many institutions have increased scrutiny of borrowers’ income and expenses – particularly in Sydney and Melbourne, which have high home price-to-income ratios.

Hobart, meanwhile, delivered the strongest annual house price growth of all capital cities at 15.9%, continuing its trend of double-digit annual growth that started in early 2017.

“We’re seeing a lot of capital from Melbourne and Sydney flow into Hobart ... as it offers relative affordability,” Powell said.