National dwelling values held steady in November, with a 0.1% fall in capital city dwelling values offsetting a 0.2% rise in values across the combined regional markets of Australia, according to CoreLogic’s November Hedonic Home Value Index results.
For the remaining broad regions of Australia, dwelling values were relatively steady, or experienced a subtle rise, over the month.
National dwelling values tracked 0.2% higher over the past three months and have increased 5.2% over the twelve months ending November.
The national annual growth rate has now halved since reaching a recent peak in May 2017, when dwelling values rose 10.4%.
The diversity in capital city housing market conditions is highlighted by the rolling quarterly change in dwelling values, which range from a 3.3% rise in Hobart, to a 2.7% decline in Darwin.
However, considering that together these two cities account for less than 1.5% of total housing stock in Australia, they have had little effect on the overall headline figures.
House values are generally showing a stronger performance compared with the unit sector.
Overall, lower growth relative to houses across the unit sector reflects a general preference for lower density housing, particularly from owner occupiers, as well as the fact that demand for new units is now being impacted by tighter credit conditions for investors and high supply levels for new high-rise unit construction over recent years.
Rental rates across the nation increased by 0.1% in November 2017 to be 0.3% higher over the past three months and 2.8% higher over the past year.
Sending a signal that gross yields have bottomed out, the rate of rental growth has been slightly stronger than the rate of dwelling value growth over the past quarter.
With household and housing debt at historic high levels, the concern will be what impact falling asset values could have on other segments of the economy.
During periods of value falls in 2008, 2010-12 and 2015-16 there were sharp increases in the ratio of household debt to asset values.
This was because dwelling values fell without a matching fall in debt.
Despite these factors, value growth will continue to slow and although there will be some falls, they are likely to be moderate, particularly given the 48% increase we have experienced in capital city values since early 2012.
This will likely occur because of rapidly growing populations and a stronger labour market against an already declining pipeline of new housing supply that will sustain some levels of demand.
Although housing market conditions may track positively across some of the smaller capital city and regional housing markets, the heavy weighting of both dwelling stock and the value of dwelling stock in Sydney and Melbourne is likely to keep the headline rates of capital gain low to negative as these two cities move through their down phase.
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