Melbourne property to outperform Sydney

While Australian housing prices have skyrocketed over 2015, according to the Reserve Bank of Australia there are signs the Sydney and Melbourne property markets could be beginning to slow with auction clearance rates falling and price growth easing in Sydney.

According to the report, Melbourne is forecasted to overtake Sydney and be the best performing capital city in 2016 with a forecast rise in dwelling prices of between 8% to 13%.

That compares to a combined capital city outlook of three per cent to eight per cent, down from the 9.8 per cent recorded in the year to June 2015. Economists from Macquarie Group and Bank of America Merill Lynch are predicting a fall in prices over the next two years because of increasing supply and lower-than-expected population growth. “But that should be it”, he said.

On the weekend, the national average auction clearance rate fell to 69.3 per cent, preliminary figures from CoreLogic RP Data showed.

Auction clearance rates have been falling across the country.

Other reasons for the slowdown are attributed to the APRA crackdown on investor lending, a slowing national economy and recent movement’s by banks to raise interest rates despite the RBA shifting rates downwards.

Australian house prices are forecasted to rise in 2016 at the slowest pace recorded since 2012, new research has revealed. Westpac Banking Corp, the country’s second-largest mortgage lender, on Wednesday (Oct 14) increased home loan rates to owner occupiers for the first time in five years as it raised A$3.5 billion (S$3.5 billion) in equity capital to meet stricter capital rules.

SQM also identifies deflationary pressures, which can push down asset prices while driving up the relative cost of debt secured against those assets, as a possible risk to Australia’s broader economic health.

SQM sees gross domestic product growth slowing to between 1.2 per cent and 1.7 per cent next year, from 2 per cent now.