Nationally, home values rose another 0.5% in July on par with the 0.5% increase recorded in June and the 18th consecutive monthly increase in home values nationally.
Note: While the headline growth rate remains positive, it's clear momentum is leaving the cycle as conditions become more diverse.
Change in house prices, 12 months to July 2024:
Source: CoreLogic
Housing Trends Across Capital Cities
Three capital cities have recorded a decline in values over the past three months, led by Melbourne with a 0.9% fall alongside small reductions in Hobart and Darwin values.The rolling quarterly pace of growth has slowed markedly in Sydney to 1.1%.
That's a fraction of the 5% quarterly gain recorded at the same time last year.
These dynamics are weighing on growth in national home values, which are up 1.7% in the past three months compared to the 3.2% increase we saw at the same time last year.
Rolling quarterly change in values, dwellings (Sydney, Melbourne, Brisbane, Adelaide):
Source: CoreLogic
The mid-sized capitals are continuing to buck the slowing trend with the quarterly pace of growth in Perth tracking at 6.2%, while growth in Adelaide accelerated to 5%.
Note: That's the fastest-rolling quarterly pace of growth since May 2022.
Brisbane housing values rose at the quarterly pace of 3.8%, although this is down from a 4.7% increase seen at the same time last year.
Available supply is a key factor explaining the diverse outcome in housing growth trends with a number of homes for sale in Brisbane, Adelaide, and Perth more than 30% below average for this time of the year, while weaker markets like Melbourne and Hobart are recording advertised supply levels that are well above average.
A reduction in borrowing capacity and affordability factors are skewing demand towards the lower price points of the market, with lower quartile values leading the growth trend across every capital city except Darwin and Canberra, which are also the two most affordable capitals after adjusting for local incomes.
Rolling quarterly change in values, dwellings (Sydney, Melbourne, Brisbane, Adelaide):
Source: CoreLogic
At a combined capital city level, cheaper dwelling values are up 3.3% over the past three months compared with a 0.8% increase for those at the top end of the market.
Regional Property Markets Update
Growth in regional housing values is once again lagging behind the capitals with a rolling quarterly rise of 1.3% across the regionals index compared with a 1.8% gain across the capitals.
Mimicking the growth pattern seen across the capital cities, regional Western Australia, regional South Australia, and regional Queensland led the role in quarterly change.
Regional Victoria was the only rest of state market to record a decline in values over the three months ending July with values down 1.4%.
Another broad theme in the housing data is that unit values are rising faster than houses across most of the capital cities.
The only exceptions over the past three months were Darwin and the ACT, where affordability barriers are less pressing, and also there's a history of higher supply levels across the medium to high density sectors that's been more apparent.
Note: Most cities now have a median house value that's at least 1.5 times higher than the median unit value.
With stretched housing affordability, lower borrowing capacity, and a lift in both investor and first-home buyer activity, it's not surprising to see the unit sector outperforming for a change.
Rolling quarterly change in dwelling values:
Source: CoreLogic
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Rental Markets Update
Changing the focus to rental conditions, CoreLogic's rental index was up only 0.1% in July.
That's the smallest monthly rise since August of 2020.
A clear slowdown in the pace of rental growth across the unit sector has been the main drag on rental growth, especially in Sydney where the annual change in unit rents has dropped from 17.9% in May last year to 6.6%.
Melbourne and Brisbane unit rents have also lost more than 8 percentage points in the annual growth rate.
Note: Slower rental growth is probably a factor of both slowing net overseas migration, and also influenced by rental affordability constraints.
It's worth noting that the slowdown in unit sector rental growth is off a high base.
Despite the slowdown, the annual pace of rental growth is still well above average levels in most regions.
Gross rental yields, July 2024:
Source: CoreLogic
Australian Housing Market Outlook
The outlook for the housing sector remains complicated.
While constraints on new housing supply are likely to keep a floor under home prices and remain a feature of the market for some time yet, clearly downside risks are growing.
Note: Housing affordability is becoming more challenging in markets where values are rising faster than incomes.
In March, the national dwelling value to income ratio rose to 7.7 and is likely to be approaching new record highs once the June quarter data is published next month.
Similarly, the portion of household income required to service a new mortgage was already at a record high in March and has likely risen further by now.
