By Jason Cadden
(Australian Associated Press)
The housing market is becoming more like a one-horse race, with price rises in Sydney almost three time faster than the next best city, Melbourne.
The harbour city has enjoyed double digit home price growth for a year and a half, but in the other major capitals annual rises have slowed by more than half.
Sydney dwelling prices rises were up 13.1 per cent in the 12 months to March, data from the Australian Bureau of Statistics shows.
The next best was Melbourne with an annual rise of 4.7 per cent, much slower than the 9.8 per cent recorded at the same time last year.
JP Morgan economist Ben Jarman said the gap in annual price growth between Sydney and the rest of the country is at its widest in 10 years.
“Sydney is booming, while outcomes elsewhere are much more subdued, generally running in low single digit annual growth rates in the rest of the country,” he said.
“This has made life difficult for the Reserve Bank, forcing regulators down the path of enhancing macro-prudential oversight of mortgage lending in the Sydney market.”
The strength in Sydney and Melbourne offset weakness elsewhere, with residential property prices across the nation’s eight capital cities up 6.9 per cent for the year to March.
However the result represented a slowdown from the 10.8 per cent growth recorded 12 months earlier.
“Sydney’s strength is proving insufficient to hold up slippage elsewhere,” Mr Jarman said.
“We have been flagging this likelihood since the annual housing sales turnover data peaked early last year.”
The ABS figures show that when comparing Sydney to the rest of the nation detached house price growth is faster than that for higher density dwellings.
Reserve Bank governor Glenn Stevens recently described Sydney house prices as “crazy”, while Treasury secretary John Fraser believes the city is “unequivocally” in a house price bubble.
Consulting firm LF Economics is now warning that a “bloodbath” in the housing market appears a near certainty when the property bubble bursts and prices start falling.
In a submission to a federal parliament inquiry into home ownership, the consultancy said the magnitude of falls required for prices to again reflect economic fundamentals were large.
“Policy-makers are caught between a rock and a hard place, as implementing needed reforms will likely burst the bubble, causing severe financial and economic fallout,” it said.
Meanwhile, Mr Jarman said the more robust housing data, along with the more stable looking jobs market, made further interest rate cuts from the RBA less likely.
CAPITAL CITY HOME PRICES IN 12 MONTHS TO MARCH:
* Sydney – up 13.1pct, median price $786,000
* Melbourne – up 4.7pct, median $527,500
* Brisbane – up 3.9pct, median $480,000
* Canberra – up 3.0pct, median $580,000
* Adelaide – up 2.5pct, median $420,000
* Hobart – up 1.9pct, median $353,000
* Perth – down 0.3pct, median $545,000
* Darwin – down 0.4pct, median $572,500
Source: Australian Bureau of Statistics