A sharp downturn in the luxury markets in Melbourne and Sydney caused a major correction in Australia’s national home prices last month, according to a new report.

In May, the CoreLogic Hedonic Home Value Index fell 0.4% year-over-year to a median A$555,274 (US$424,570), marking the first negative price growth annually since October 2012, according to data released last Friday by CoreLogic, a leading market information provider.

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It was also the eighth month in a row the index posted a month-over-month price decline since the national market peaked in September last year.

Weakening housing conditions across the eight capital cities, including Sydney and Melbourne, were mostly responsible for the price downturn at a national level, said Tim Lawless, head of research at CoreLogic.

The price index for capital cities ended May with a 1.1% decline year-over-year, while the index for other regions combined saw a 2.2% increase.

Change in Australia’s Home Prices
Region Month Quarter Annual Median Value
Sydney -0.2% -0.9% -4.2% A$871,454
Melbourne -0.5% -1.2% 2.2% A$717,020
Brisbane 0.2% 0.2% 0.9% A$494,038
Adelaide 0.5% 0.3% 0.6% A$437,234
Perth -0.1% 0.1% -1.8% A$463,319
Hobart 0.8% 3.7% 12.7% A$430,429
Darwin -0.2% 1.3% -7.9% A$434,134
Canberra -0.1% 0.8% 2.3% A$592,954
Combined Capitals -0.2% -0.6% -1.1% A$654,710
Combined Regional 0.2% 1.0% 2.2% A$365,792
National -0.1% -0.3% -0.4% A$555,274
Source: CoreLogic

In Melbourne, although home prices still grew 2.2% year-over-year, they decreased on both a monthly (-0.5%) and quarterly basis (-1.2%). The quarterly price decline is the largest since February 2012, according to the report.

The luxury segment, or the top 25% of the market in Melbourne, fell 3.3% since last September’s peak. Contrastly, the bottom 25% remained flat while the broader middle market only slipped 0.8% during the same period of time.

The price index for Sydney fell on all comparable periods, down 4.2% annually, 0.9% quarterly and 0.2% monthly.

The top 25% of the Sydney market fell 7.1% from September’s peak, compared to a 1.4% decline for the most affordable quarter of the market and a 3.3% fall for the mid-range market.

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Sydney and Melbourne comprise approximately 60% of Australia’s housing market by value, “so the performance of these two cities has a larger effect on the headline market performance,” Mr. Lawless said.

Nationally, the luxury segment was also the worst performer with a 1.3% price decline over the past 12 months, making it the only segment in negative territory, according to the report.

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