House prices stall as tougher regulations bite

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House prices stalled in April as the impacts of tougher lending standards for property investors appeared to cool the two hottest markets, Sydney and Melbourne.

Overall, dwelling prices across all capital cities grew by just 0.1 per cent in April, the slowest month-on-month growth since December 2015, according to data compiled in the CoreLogic Home Value index.

Sydney prices were broadly flat, while Melbourne eked out 0.5 per cent growth over the month.

"Most other capital cities also recorded softer growth conditions in April than for the first three months of 2017," CoreLogic's head of research Tim Lawless said.

House prices continued to fall in Perth, down 1 per cent, while Canberra suffered the sharpest dip, down 2.8 per cent.

The other capital cities recorded growth of between 0.5 and 1 per cent, with Hobart recording the strongest growth and Adelaide not far behind.

Over the year, capital city dwelling prices rose 11.4 per cent, with Sydney surging 16 per cent and Melbourne up 15.3 per cent.

Tougher investor lending rules bite

However Mr Lawless said he was cautious about calling a peak in the market after only one month of soft results.

"April, in particular, coincides with seasonal factors including Easter, school holidays and the Anzac Day long weekend," he noted.

Nonetheless, Mr Lawless said the softer results should also be viewed against a backdrop of an ever-evolving regulatory landscape firmly aimed at slowing investment and interest-only mortgage lending.

APRA's tougher stance on investment lending came into force at the end of March.

APRA's pressure also encouraged another round of aggressive out-of-cycle mortgage rate rises from all the key lenders over the past two months.

"The higher cost of debt, as well as stricter lending and servicing criteria, has likely dented investment demand over recent months," Mr Lawless said.

"In a city like Sydney, where more than 50 per cent of new mortgage demand has been from investors, a tighter lending environment for investment purposes has the potential to impact housing demand more than other cities."

The environment for investors is likely to only get tougher, according to the chief banking regulator, APRA chairman Wayne Byres.

Speaking at a housing conference on Friday, Mr Byres said having recently spoken to all the major lenders, he expected further tightening was on the way — particularly for investor loans.

ANZ raised some of its interest-only loans by up to 50 basis points immediately after the speech.

While prices have stalled, clearance rates rebounded in the final week of the month after falling below 70 per cent for the first time since January.

"It's hard to know whether the rebound in clearance rates over the final week of April could be attributed to vendors willing to accept a lower than expected price at auction," Mr Lawless said.

"Considering growing sentiment and market commentary that the housing market is likely at or near the peak of strong growth conditions, some vendors may be more motivated to offload their property in case conditions do soften further."

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