House prices are cooling with Sydney and Melbourne leading the drop
As noted earlier here, it's the first time since 2012 that Australian capital city home prices have fallen compared to what they were a year ago.
Sydney's 3.4% y/y decline is the weakest reading since 2009 and it looks like it will only be a matter of time before Melbourne's home prices cross over to the side where they will be weaker on a year-on-year basis.
So, what happened the last time when house prices were this weak?
The last two times - in 2008 and 2011 - when the housing market saw such a trend, the RBA actually stepped forward with rate cuts. The decline in 2008 was a lot sharper because of the global financial crisis, so it wasn't that surprising. But the one in 2011 was largely led by Melbourne house prices, but dwellings all over the country also saw a decline in prices too.
And the latter will probably be what the RBA is more concerned with. If you strip out Sydney and Melbourne, house prices from other capital cities are still holding up and should that still be the case then the RBA will continue to stay on hold with regards to its cash rate policy.
But the latest round of weakness in housing data will at least ease some of the pressure off silent calls for the central bank to tighten monetary policy any time soon.
