Home prices in major Australian cities fell for the eighth consecutive month in May as banks tightened lending standards, reining in demand in Sydney and Melbourne, although sub-developed markets continued to rise.
Real estate consultancy CoreLogic said on Friday that after falling 0.4 percent in April, the state-run city`s home price index fell 0.1 percent in May from a month earlier, down 0.4 percent from a year earlier, the first annual decline since October 2012.
In addition to tougher regulatory rules, banks have been raising lending standards as several large banks and institutions have been exposed to widespread misconduct in lending and financial advice.
As a result, demand in Sydney and Melbourne fell sharply, ending a five-year housing boom.
Tim Lawless, head of research at CoreLogic, said: "the negative growth shows that the housing market in Melbourne and Sydney-led state capitals, which previously led the country in house price growth, is softening."
Shane Oliver, chief economist at AMP, said in a note to clients, "the tightening of lending standards for investors and interest-only borrowers is clearly continuing to have an impact, coupled with low affordability of house prices, increased supply and lower expectations for price growth. And the disappearance of the `miss-loss phobia` (FOMO) is driving home prices down in cities that have seen strong growth in the past few years, namely, Sydney and Melbourne. "
He expects home prices in the two cities to fall about 4 percent this year, another 5 percent next year and continue to fall by 2020, bringing home prices down about 15 percent from their peak levels. However, he said, "without a sharp rise in interest rates or unemployment, a hard landing is unlikely."
Sydney and Melbourne account for about 60 percent of Australia`s housing market by value and 40 percent by property volume.
Sydney`s house prices fell 0.2% in May from a month earlier, down 4.2% from a year earlier. At the height of the housing boom, Sydney`s house prices grew at a rate of more than 20% a year.
Melbourne home prices fell 0.5% from a month earlier, down 2.2% from a year earlier.
In May, prices outside the state`s cities rose 0.2 percent from a month earlier, up 2.2 percent from a year earlier. The best performing state was Hobart of Tata, up 12.7% a year.
Banks have raised interest rates on some mortgage products because of tighter lending standards for investor loans and interest-only loans.
(RBA) also expressed concern that property speculation triggered by debt could eventually hurt banks and customers.
