Sydney and melbourne markets lose heat

Sydney Harbour Photo: Wikimedia Commons

Australia's two hottest housing markets are losing their heat.

Sydney and Melbourne have continued to see an easing in the rate of capital gain over the month of October, according to the latest figures from CoreLogic RP Data.

Since the end of 2008, the Sydney housing market has recorded a cumulative capital gain of 77 per cent, while Melbourne values have moved a cumulative 66.6 per cent. Based on the median selling price at the end of 2008, Sydney home owners have accrued approximately $316,000 in gains from the housing market compared with around $246,000 in Melbourne.

Now, though, that sky-rocketing growth is starting to cool down. Values still rose 0.3 per cent and 0.6 per cent respectively over October 2015, although they both mark a significantly slower rate of increase.

Dwelling values across the combined capital city index moved 0.2 per cent higher over the month of October, were up by 1.4 per cent over the quarter, and 10.1 per cent higher over the year. The annual rate of growth across the combined capitals index has been easing since July this year when the index was rising at 11.1 per cent per annum.

According to CoreLogic RP Data head of research, Tim Lawless, a range of factors are contributing to the slowdown.

"It’s not just the fact that mortgage rates have recently risen outside of any lift in the cash rate. We are also seeing approximately a 30 per cent premium on investment related mortgage rates, tighter lending standards and borrowers generally requiring a larger deposit.

"Gross rental yields at record lows and affordability constraints are acting as a further disincentive, particularly in Sydney where the median unit price is equal to, or higher than the median house price in every other capital city. Additionally, new housing supply is moving through record levels which should help to ease the upwards trajectory of home values."