Home values fall for a second consecutive month

  • By Zilla Efrat

CoreLogic’s national Home Value Index (HVI) shows that Australia’s housing downturn gained momentum in June, driven by sharper falls in Sydney and Melbourne and weakening conditions elsewhere.

The HVI recorded a second consecutive month of value declines in June, down 0.6 per cent for the month and 0.2 per cent lower over the June quarter.

Sydney dwelling values fell 1.6 per cent for the month and 2.8 per cent for the quarter. Melbourne’s values were down 1.1 per cent for the month and 1.8 per cent for the quarter.

Housing values were also down in Hobart – by 0.2 per cent for the month and 0.1 per cent for the quarter. Regional Victoria experienced a drop of 0.1 per cent for the month but was up 1.2 per cent for the quarter.

CoreLogic says every capital city and broad rest of state region is now well past their peak rate of growth as trend rates eased across the remaining markets.

Australia’s third largest city, Brisbane, has seen growth in housing values flatten out to just 0.1 per cent in June, while Adelaide remains the only capital still recording a monthly growth rate higher than 1.0 per cent (1.3 per cent). Growth in Perth’s housing values, which were temporarily showing a second wind as state borders reopened, are again losing steam with values up 0.4 per cent in June.

CoreLogic research director, Tim Lawless, notes that the housing market’s sharper reduction in growth coincides with the May cash rate hike, surging inflation and low consumer sentiment.

“Housing value growth has been easing since moving through a peak in March last year when early drivers of the slowdown included rising fixed term mortgage rates, an expiry of fiscal support, a trend towards lower consumer sentiment, affordability challenges and tighter credit conditions,” he says.

“More recently, surging inflation and a rapidly rising cash rate have added further momentum to the downwards trend. Since the initial cash rate hike on May 5, most housing markets around the country have seen a sharper reduction in the rate of growth.

“Considering inflation is likely to remain stubbornly high for some time, and interest rates are expected to rise substantially in response, it’s likely the rate of decline in housing values will continue to gather steam and become more widespread.”

The combined regionals index remained in positive growth territory in June, albeit slightly, rising 0.1 per cent, reducing quarterly growth from a peak of 6.6 per cent in April last year, to 2.0 per cent over the three months to June.

In contrast, the combined capital cities index was down -0.8 per cent over the June quarter, reducing from a peak of 7.1 per cent over the three months to May last year.

Unit markets are holding their value a little better than houses across the largest capitals. Sydney recorded a 3.0 per cent drop in house values through the June quarter compared with a 2.1 per cent fall in unit values. Melbourne also showed a smaller quarterly decline in units relative to houses at 0.5 per cent and 2.4 per cent respectively.

“The stronger performance across the unit sector comes after house values consistently outperformed units through the upswing,” says Lawless.

Since the onset of the COVID-19 pandemic in March 2020, capital city unit values have risen 9.8 per cent compared to 24.7 per cent for houses, resulting in better affordability across the medium to high-density sector.”

As housing conditions slow, the market is swinging back in favour of buyers. While national advertised stock levels remain 7.4 per cent lower relative to 2021, in Sydney and Melbourne, where housing conditions are the weakest, total advertised supply is now 7-8 per cent above the levels recorded a year ago and well above the five-year average.

Hobart has seen advertised stock levels jump 48.4 per cent higher relative to last year and inventory is 20.7 per cent higher in Canberra.

In Adelaide, where housing conditions remain quite strong, advertised stock levels are still 16.9 per cent lower than last year and almost 40 per cent below the five-year average. Brisbane, down 14.9 per cent, and Perth, down 16.2 per cent, are also showing low advertised stock levels relative to this time last year.

Lawless says the rise in advertised supply across some markets is mostly due to a slowdown in the rate of absorption.

“Estimated transactions in Sydney throughout the June quarter were -36.7 per cent lower than a year ago while Melbourne is down -18.3 per cent. At the same time, the flow of new listings added to the market is falling as selling conditions become more challenging and listings move into a seasonal lull.

“We aren’t seeing any signs of panicked selling as housing conditions cool. In fact, the trend is the opposite, with the flow of new listings to the market slowing.”