Housing Over Supply - Australia

House prices off the boil, but will population growth keep things simmering?

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Whichever way you look at it — forward or backwards — Australia's housing boom is well and truly off the boil.

Key points:

Falling house prices in the September quarter adds to evidence the property market has peaked

Tighter lending rules, low wages, a drop in Chinese investment and falling auction clearance rates point to ongoing weakness

Population growth is likely to support prices to an extent but not absorb all new housing supply

The latest evidence comes from the rear vision mirror of the Australian Bureau of Statistics' house price index which fell in the September quarter.

The slowdown was most marked in the investor hotspot of Sydney, while price inflation also appears to have peaked in Melbourne.

Looking forward there are obvious speed humps in the shape of further regulatory tightening on investor loans and weak wages growth.

On top of that, new apartments are banking up like a multi-car prang at peak hour, while a pull back in Chinese investment and falling auction clearance rates are hardly supportive of prices re-accelerating either.

Sydney house prices fell 1.4 per cent in trend terms, or 0.4 per cent seasonally adjusted, while Melbourne eked out a modest gain — but well off the growth of recent years.

Hobart, which joined the housing express lane late, reported the strongest quarterly rise (+3.4 per cent), while Brisbane also accelerated modestly. Other markets were relatively flat over the quarter.

Nationally, the house price index (HPI) was down 0.2 per cent over the quarter, although in seasonally adjusted terms — taking into account the usual sluggish bidding at winter auctions — prices edged up.

"For anyone in doubt, the weakening in house prices in the third quarter all but confirms that Australia's housing boom is over," Capital Economics' Paul Dales said.

(Source: Australian Broadcasting Corporation)