Originally published by AMP Capital
- December CoreLogic Australian capital city dwelling prices fell another 0.4%, resulting in annual growth for 2017 slowing further to 4.3%, from a high of 11.4% in May.
- The falls were led by another 0.9% decline in Sydney which saw annual growth slow to just 3.1%, a 0.2% fall in Melbourne (+8.9%yoy) and ongoing falls in Perth (-2.3%yoy) and Darwin (-6.5%yoy).
- Property prices in Brisbane (+2.4%yoy), Adelaide (+3%yoy) and Canberra (+4.9%yoy) are seeing modest-moderate gains on an annual basis.
- Property prices in Hobart (+1.5%mom/+12.3%yoy) are booming as demand spills over from Melbourne.
Dwelling prices in Sydney have now fallen 2.2% from their July high with houses seeing the bulk of the weakness in contrast to units. Weak auction clearance rates point to more price falls ahead as the impact of APRA’s tightening in lending standards, deflated expectations for price gains and rising supply continue to impact. The Melbourne property market appears to be following Sydney down although stronger population growth is providing some support. Prices in Sydney and Melbourne are expected to fall by around 5% or so this year. Still low interest rates and support for first home buyers are providing some support and should help ensure only moderate price falls. A property crash is unlikely in the absence of much higher interest rates and/or unemployment – both of which are unlikely.
Dwelling prices in Perth and Darwin are likely close to bottoming. Hobart is likely to remain strong and Brisbane, Adelaide and Canberra are likely to see moderate price gains this year.
Meanwhile, December manufacturing conditions PMIs remained strong at 57.1 on the CBA measure and 56.2 according to AIG. These tend to be noisy but are at levels consistent with reasonable growth (at least in manufacturing).
There is nothing in this that changes our view on the RBA for this year – no rate hike until year end at the earliest.