Property prices in Sydney, Melbourne fall sharply, new research shows

Price growth across the national property market has ground to a halt, with steep falls in Melbourne and Sydney as higher interest rates, stretched affordability and the federal government’s overhaul of tax incentives combine to suppress values.

Figures from property data firm Cotality released on Monday show that through May, during which the Reserve Bank pushed official interest rates to 4.35 per cent and Treasurer Jim Chalmers outlined changes to negative gearing and capital gains tax, capital city property values were static.

But in Sydney, overall values fell by 0.9 per cent to be down by 2.1 per cent over the past three months. The drop was driven by houses, with values falling by 1.1 per cent to be down 2.5 per cent since the start of the year. The median value of a Sydney house went through the $1.6 million mark in February. It has now subsided to $1.58 million.

In Melbourne, total dwelling values slipped another 0.8 per cent to be down by 2.3 per cent during the quarter. Again, the values of houses dipped further, down by 1 per cent to a median of $958,000 compared with a 0.4 per cent drop in the value of units.

The easing prices in the nation’s two largest markets contrast with most other capital cities. Perth house values jumped another 1.4 per cent, the median value being now just shy of $1.1 million. Over the past year, values in the city have soared by 25.6 per cent.

Brisbane house values increased by 0.8 per cent last month to be 18.6 per cent up over the past year, with the median value now at $1.23 million. Values also increased in Hobart, Darwin and Adelaide, although they fell in Canberra, where the median house value remains just over $1 million.

Cotality research director Tim Lawless said headwinds were growing across the entire national property market, in part due to affordability issues, as incomes failed to keep up with price growth.

He said the tightening of monetary policy and the federal government’s new tax policies would also weigh on a market that would ultimately give potential buyers more options for their money.

“The largest drop in estimated sales can be seen in Sydney and Melbourne, down 17 per cent and 14.2 per cent on levels a year ago,” he said.

“These are also the cities where advertised supply has risen to above average levels, providing more choice and better leverage for buyers.”

Regional markets are doing better than the capital cities, with values up by 0.6 per cent in May. Every region grew last month, although it was the smallest increase in a year.

Lawless said new rents lifted by another 0.6 per