The government’s careful ‘scalpel’ surgery on the housing market may not be the reason for cooling prices, experts say.
Sydney prices dropped 0.72 per cent between October and November, compounding on small monthly declines since September.
Many had attributed this to the Australian Prudential Regulation Authority’s crackdown on mortgage lending to investors in March. Treasurer Scott Morrison had already trumpeted the restriction as a win for housing affordability.
But ANU professor Ben Phillips said dampening prices and a weakening clearance rate could merely be part of the market’s natural cycle.
“You tend to find house prices in Sydney, like it did 15 or so years ago, they have peaks and troughs, and perhaps we’ve just gone past the peak,” Professor Phillips told The New Daily.
“Whether it’s related to APRA’s movements … I’m not entirely sure, it’s hard to know.”
He said it may have had some impact, but that price growth simply could not continue on its trajectory after rising around 20 per cent over 18 months.
“There’s only so long that that can go on for so perhaps that sort of house price flipper cycle, if you will, is drawing to an end in Sydney.”
Earlier this year, APRA told lenders to limit interest-only loans to 30 per cent of all new residential mortgages, down from the then-rate of 40 per cent. Banks were also told to place stricter limits on interest-only loans with deposits of less than 20 per cent.
The banking regulator was effectively putting a ‘speed limit’ on the writing of loans to investors.
Just one month after the restrictions, Mr Morrison said the government’s “smooth” approach was working.
“The apartment market is already turning,” the Treasurer told the Australian Financial Review at the time.
In October, Mr Morrison told Citigroup the measures, supported by the government, were “working to smooth the landing in our housing markets”.
Professor Phillips was hesitant to speculate on the future of market, but did not expect prices to skyrocket again soon.
“It would be surprising to see them take off again another 20 per cent for another year like it did in 2016,” he said.
“There’s no regularity to it, but every now and then you have a very strong year, and then it sort of tapers off for several years into the future. That’s probably what’s going to happen, but no one can really tell.”
Professor Phillips said it was possible Melbourne could follow Sydney’s lead and begin to slow, after experiencing a moderate monthly rise of 0.52 per cent in November.
“It still has that upward momentum that Sydney had, say 12 months or so ago, but look, again, it would be surprising to see it have the sort of year next year as what it’s had this year and the previous year,” he said.
“It’s just been incredibly strong growth in Melbourne and to see that continue for three or four years would be surprising.”
Professor Phillips said it was unlikely to provide any real relief for first home buyers.
“I think house prices are all so high that unless you’re in specific markets where there’s little goodies being handed out by state governments with regards to the special first home buyers’ grant and discount stamp duties, unless that’s happening in specific marketplaces, it’s hard to see first home buyers really being able to get into the market.
“While prices may not be increasing year on year as strongly as they were, they are of course at very high levels.”
Meanwhile, Daniel Cohen, spokesman for advocacy group First Home Buyers Australia, said the organisation was “very positive about those APRA changes” but believed there was more behind the cooling.
“I think it’s a mixture of factors and that is part of the equation absolutely,” Mr Cohen told The New Daily.
Mr Cohen said there had been a “small pick-up in first home buyer activity”.
“That’s on the back of changes to policies – such as [restricting] interest-only loans discouraging investment activity a little bit, and on the flip side stamp duty [restrictions] and things like that in New South Wales and Victoria promoting first home buyer activity.”