House price growth slows to a trickle

The strong run for Australia's housing market may be beginning to wane, as the growth in dwelling values slows to a rate not seen in half a year.

The easing could be good news for first home buyers and middle-income families that have been hard-pressed to get into a market, where house values have risen by 8.4 per cent and units by 8.2 per cent so far this year.

RP Data-Rismark reports that capital city values grew by only 0.1 per cent in November after posting a rise of more than 1 per cent each month for the past six months (except August, which was 0.5 per cent).

"It looks like we may have hit peak growth," said RP Data research analyst Cameron Kusher. "If you look at the last two growth cycles in 2007 and 2009, they peaked around 18 or 19 months in. We're now at 19 months in this latest phase and growth is starting to flatten.

"Obviously interest rates are still low and there will still be some capital growth in the market, but we don't think it will be as strong as it has been over the last few months."

RP Data-Rismark found the Melbourne market fell by a notable 2.1 per cent in November. Brisbane failed to show any movement, and values fell by 0.5 per cent in Hobart and 1.3 per cent in Canberra.

Rises of 0.9 per cent were recorded in Sydney, Adelaide was up 1.2 per cent, Darwin 2.8 per cent, and Perth by 2.9 per cent.

But analyst Louis Christopher, of SQM Research, disputed the call that the market had peaked based on a single month's data.

"It may have been a flat month of growth but that doesn't necessarily mean we've seen the peak," he said. "There can be a lot of seasonality in the later spring months, when clearance rates ease and there is a lot of stock on the market. I'd put it down to that more than anything else."

RP Data estimates that the recent strong run has pushed dwelling values to new highs in Perth and Sydney, which are now 2.3 per cent and 10.1 per cent respectively above their previous peaks.

Melbourne remains 2.8 per cent below its peak, while Adelaide is down by 2.7 cent and Canberra by 3.5 per cent. The lag is substantial in Darwin, where prices are 7 per cent lower. Brisbane is 8.4 per cent below peak and Hobart 15.6 per cent.

Strong demand from investors has been a major influence driving recent price rises, analysts say.

The latest data is also likely to be welcomed by the Reserve Bank, which has warned that an influx of self-managed super funds into the market could potentially "exacerbate property price cycles".



RISING INTEREST

Annual change in home values (%)

Sydney 12.5

Melbourne 6.6

Brisbane 2.8

Adelaide 2.6

Perth 8.9

Canberra 0.8

Darwin 1.6

SOURCE: RP Data