Australia housing bubble slowly deflating as heat leaves Sydney, Melbourne

SYDNEY (REUTERS) - Australian home prices are slowly coming back to earth as the sky-high markets of Sydney and Melbourne lose some heat, though there is still plenty of lift in the smaller cities and regions.

Figures from property consultant CoreLogic out on Friday (April 1) showed that prices in the combined capital cities edged up only 0.3 per cent in March from February, as Sydney dropped 0.2 per cent and Melbourne 0.1 per cent.

Brisbane fared much better with a rise of 2.0 per cent, while Perth rose 1 per cent and Adelaide 1.9 per cent.

Values in the regions jumped 1.7 per cent amid a shift to country living and greater space. For the whole March quarter, regional prices climbed 5.1 per cent compared with just 1.5 per cent for the cities.

Combined, prices nationally rose 0.7 per cent in March, up 18.2 per cent on the year.

"Virtually every capital city and major rest-of-state region moved through a peak in the trend rate of growth some time last year or earlier this year," said CoreLogic research director Tim Lawless.

"The sharpest slowdown has been in Sydney, where housing prices are the most unaffordable, advertised supply is trending higher and sales activity is down over the year."

The median price of a home in Sydney is A$1.1 million (S$1.12 million), well above the national median of A$739,000, while a house would set you back A$1.4 million.

The market had its strongest year ever in 2021, with the notional value of Australia's 10.8 million homes rising by A$2 trillion to A$9.9 trillion.

The boom was a windfall for household wealth and consumer spending power, but also caused concerns about affordability that will be a hot-button issue for federal elections due in May.

An explosion in mortgage debt also led regulators to tighten lending standards and is adding to the case for a rise in interest rates from the Reserve Bank of Australia.