SYDNEY (BLOOMBERG) - Australian home prices fell in the final three months of 2017, the first such decline in almost two years, as the nation's biggest market Sydney continued to cool.
Values nationally declined 0.3 per cent in three months to Dec 31, the first such drop since the period ending April 2016, according to CoreLogic data released on Tuesday (Jan 2). Prices in Sydney dropped 2.1 per cent in the quarter, dragging the city's annual growth rate to 3.1 per cent from 17.1 per cent just seven months ago.
"Sydney's housing market has become the most significant drag on the headline growth figures," said Tim Lawless, CoreLogic's head of research.
The once red-hot Sydney market is cooling after regulators clamped down on interest-only mortgages typically favoured by investors. Rising state taxes have also made housing more expensive for foreign buyers.
CoreLogic said it sees softer conditions throughout 2018, driven by the slowdown in Sydney and to a lesser extent, Melbourne.
Melbourne home values fell by 0.2 per cent in December, the first monthly drop since February 2016, paring the quarterly gain to 0.9 per cent, the data show. The market in the nation's second-biggest city is more resilient due to stronger population gains, a higher rate of jobs growth and better affordability, according to CoreLogic.
Values fell a combined 0.5 per cent across the state and territory capitals during the quarter, including a 2.9 per cent drop in Darwin. Hobart, the state capital of Tasmania, was the best-performing market with a 3.1 per cent gain.
Shane Oliver, chief economist at AMP Capital, said prices in Sydney and Melbourne could fall by around 5 per cent this year.
"Still, low interest rates and support for first home buyers are providing some support and should help ensure only moderate price falls," Oliver said.