Melbourne house prices fall for the first time in 14 months

Melbourne home values have dropped by 0.10 per cent in December – the first price decline in 14 months, as the flood of new listings swamped buyers and the hikes in fixed mortgage rates, higher buffers and poor affordability kept many more at bay, early data from CoreLogic shows.

Sydney dwelling prices have also slowed dramatically, rising by just 0.3 per cent during the month – its lowest level since October last year when it grew by 0.1 per cent.

However, all capitals posted strong gains over the year, led by Brisbane which finished 2021 with a 27.4 per cent rise – the largest annual growth in 18 years, followed by Sydney, which notched up a 25.3 per cent jump in dwelling values – the fastest yearly increase since 1988.

Adelaide surged by 23.3 per cent, which was a record high for the capital, while Melbourne grew by 15 per cent.

Perth rose by 13.1 per cent and values nationally by 21.6 per cent – the sharpest rise in more than three decades.

AMP Capital chief economist Shane Oliver said Melbourne’s weak monthly performance could signal a peak in home prices in the capital.

“I started to see price declines in early December, so it’s quite possible we have already seen the peak in Melbourne prices,” he said.

“However, there’s danger in reading too much into the data because the surge in listings in the lead up to Christmas came at a time when buyers normally start to quieten down, so it may have distorted the picture of the Melbourne property market.

“But I suspect that it’s all still part of a trend towards slowing growth which will continue this year, so if prices haven’t peaked yet, then I think it’s going to occur sometime in the next couple of months.”

Dr Oliver said the rise in fixed rates, higher mortgage buffers, the surge in listings and worsening affordability have had a bigger impact in Melbourne and Sydney than the smaller cities.

“Both markets have been impacted by all these factors, but whichever way you cut it, the broad trend will remain in place – we’ve seen the peak in home price growth and the property boom is fading, led by Sydney and Melbourne,” said Dr Oliver.

“Obviously there’s uncertainty about the timing, but if prices continue to slow like it has, then we could see a peak in Sydney prices earlier, which I think will occur in September and nationally around October.”

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