National Housing Market Update [video] | November 2018

The housing market continued to lose steam last month, with national dwelling values slipping half a percent, taking the overall market 3.5% below their recent peak.

Core Logic has released their newest housing market update for November 2018.

National dwelling values haven't fallen this much over a single year since February 2012.

On a rolling quarterly basis, dwelling values are now trending lower across both the combined capital city regions, where they were 1.6% lower, as well as across the combined regional areas of Australia, where values were almost 1% lower.

With such broad-based weakness in housing market conditions, it's clear that tighter credit availability is acting as a drag on housing demand and impacting adversely on the performance of housing values across most areas of the country.

The weakest conditions continue to be felt across Australia's two largest cities where investment buyers have been the most concentrated, where supply additions have been the highest and where housing affordability is the most stretched.

Sydney values are down 7.4% over the past twelve months and Melbourne values are 4.7% lower over the same period.

Values also declined in Perth and Darwin however, the downturn in these two cities has been ongoing since mid-2014, with values falling 3.3% and 2.9% respectively over the past twelve months.

Although dwelling values are rising on an annual basis across the remaining cities, the pace of growth has eased relative to a year ago.

The regional housing markets of Australia have also returned a diverse performance, with regional Tasmania standing out as the only broad region nationally where dwelling values are recording double digit growth, up 11.4%.

Both Hobart and regional Tasmania continue to record strong housing market conditions, driven by robust housing demand coupled with a shortage of supply.

Regional Victoria is also showing strong growth conditions as demand continues to ripple outwards from Melbourne towards the more affordable cities peripheral to the city's metropolitan area.

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Regional Western Australia continued to show challenging conditions with the annual pace of decline revealing some renewed momentum with values falling by 6.5% over the past twelve months.

Nationally, the highest value quarter of the market has led the downturn, with values falling 6.6% across this segment over the past year while lower quarterly values have recorded a 0.5% rise in values.

At such a broad geographic level, the weakness in higher value markets is reflective of the weaker conditions across the capital cities, particularly Sydney and Melbourne.

The disparity of performance between the upper and lower quartiles is clear across the individual cities as well.

In Melbourne, the top 25% of the market by value has seen values fall by almost 9% over the past twelve months$ a slightly weaker performance than Sydney`s upper quartile market where values are down by 8.6%.

At the same time, more affordable housing markets have seen a 2.9% rise in values across Melbourne over the past year, while Sydney`s lower quartile has recorded a fall that is almost half of the upper quartile.

Gross rental yields are slowly recovering as dwelling values trend lower and rents edge higher. Nationally, gross rental yields are picking up from previous record lows, rising from 3.7% in October last year to reach 3.8% in October 2018.

Despite the subtle rise, gross rental yields remain well below their decade average of 4.3%.

A recovery in rental yields back to average levels is likely to take some, considering national rents have remained relatively flat over the year to date and are only 0.8% higher over the past twelve months.

Rental yields reached record lows in late 2017 due to values consistently rising at much faster pace than rents through the growth phase.

Rental yields were compressed more significantly in Sydney and Melbourne, reaching record low readings of 3.0% and 3.1% respectively in 2017.

These cities are still recording the lowest yield profiles at 3.24% and 3.34% at the end of October 2018.

Rental yields are the highest in Darwin at 5.7% and Hobart at 4.9%, however both cities are seeing rental yields trend lower as dwelling value movements are more positive relative to rental movements.