House price falls set to continue

HOME values fell again in August and analysts are predicting a 1.6 per cent drop for 2018, as tighter credit conditions and slower income growth continue to weigh on the housing market.

It comes after home values surged 9.5 per cent in 2017, according to the CoreLogic Hedonic Home Value Index.

“The Australian housing market will continue its downward correction on a national basis through 2018 and most of 2019, but trends will show a degree of diversity at the city and state levels,” Moody’s analysts said.

“Sustained regulatory action – including limits on new bank lending exposure to the local property market and higher borrowing costs, especially for investors who tend to carry higher leverage – is bearing fruit.

“While other cities are not enduring the same degree of slowdown as Sydney, there is across-the-board slowing in 2018 compared with 2017.”

Moody’s said the value of home loans was down 8.4 per cent in June, compared to the same time last year, driven by a sharp 18.1 per cent fall in the number of investor loans yearon-year.

The index flagged a 5.1 per cent fall in the value of Sydney houses this year and a rise of just 0.6 per cent in 2019.

House values in Melbourne are likely to decelerate from a 12.5 per cent rise last year to a 0.3 per cent fall this year, on declines in inner Melbourne.