The national combined dwellings index posted a modest 0.3% fall in January, taking dwelling values 0.7% lower since their recent peak in September last year.
Dwelling value falls were most evident across the capital city regions, with the combined capitals index down half a per cent over the month, while the combined regional areas of Australia continued to see values edging higher, up 0.2% in January.
The combined regional markets have now recorded a stronger monthly change in values relative to the combined capital cities over each of the past four months.
Across the capital cities, while broad-based, the softer month-on-month housing market conditions were led by Sydney (-0.9%), with declines also reported in Melbourne (-0.2%), Adelaide (-0.2%), Perth (-0.4%), Darwin (-0.2%) and Canberra (-0.1%) while values in Brisbane were unchanged.
While January may deliver additional noise in the indices results, the negative monthly result lines up with recent months, which showed a softening trend, particularly in Sydney and, to a lesser extent, Melbourne.
In the absence of a catalyst to reinvigorate the market, such as lower mortgage rates or a loosening in credit policies, we expect to see a continuation of softening conditions across these markets.
Focusing on the results over the past three months, the trend in housing market conditions becomes clearer, with the only capital cities to record a decline over the three months ending January being Sydney (-2.5%), Perth (-0.3%) and Darwin (-1.6%).
The remaining capitals are generally seeing dwelling values holding firm or showing only a subtle rise.
It was the first time since the three months to December 2006 that Sydney recorded the weakest value change of all capital cities.
While dwelling values are now easing, both at a macro level and across several of the capital cities, it is clear that Australian housing values aren’t falling off a cliff.
National dwelling values are down just 0.7% over the past four months after increasing by 41% during the growth phase.
CoreLogic cites strong jobs growth and low unemployment, high migration levels and low mortgage rates as the key factors to support a continuation in the housing markets’ soft landing.
Labour market conditions have generally been improving, with stronger jobs growth spreading outside of Victoria and New South Wales, particularly into Queensland, and, to a lesser extent, Western Australia.
Stronger labour markets are likely to help drive confidence and support mortgage demand.
If the trend persists, stronger conditions may help to push wages growth off near record lows which would also provide a positive influence on housing market conditions.
We’re also seeing strong population growth contributing to housing demand.
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