The final figures are in showing how our property markets performed in 2017.
National dwelling values fall 0.3% in December, setting the scene for softer housing conditions in 2018
The CoreLogic December Hedonic Home Value Index shows that national dwelling values slipped lower over the month, led by falls across Sydney, Darwin, Melbourne and Perth.
The transition towards weaker housing market conditions has been clear but gradual and is likely to continue throughout 2018.
From a macro perspective, late 2016 marked a peak in the pace of capital gains across Australia with national dwelling values rising at the rolling quarterly pace of 3.7% over the three months to November.
In 2017 we saw growth rates and transactional activity gradually lose steam, with national month-on-month capital gains slowing to 0% in October and November before turning negative in December.
The 0.3% fall in December was the catalyst for dragging the quarterly capital gains result into negative territory for the first time since the three months ending April 2016.
Nationally, dwelling values were 4.2% higher over the 2017 calendar year which is a slower pace of growth relative to 2016 when national dwelling values rose 5.8% and in 2015 when values nationally were 9.2% higher.
Across Australia the shift to falling national dwelling values is being driven by the capital cities, with the combined capitals tracking half a percent lower over the December quarter, while across the combined regional areas of Australia, values were half a percent higher over the quarter.
Amongst the capitals, the weakest conditions are concentrated in Sydney and Darwin.
Sydney’s housing market has become the most significant drag on the headline growth figures.
Sydney dwelling values were down 0.9% over the month to be 2.1% lower over the December quarter and 2.2% lower relative to their August 2017 peak.
The city’s annual rate of growth is now tracking at just 3.1%; a stark difference to the recent
cyclical peak when values were rising at the annual rate of 17.1% only seven months ago.
Despite the reversal in growth rates since August 2017, Sydney dwelling values remain 70.8% higher than their cyclical low point in February 2012.
For Darwin the housing downturn is entrenched, with values trending lower since May 2014.
The calendar year saw Darwin values down 6.5%. Since the 2014 peak, Darwin housing values have fallen by a cumulative 21.5%.
While conditions for capital gains have been exceptionally weak across Darwin, rental prices are down by only 1.5% over the year.
The substantial fall in values relative to rents has pushed Darwin rental yields to their highest level since July 2015 (5.9%) and Darwin rental yields are the highest of any capital city.
Melbourne also posted negative month-on-month change with dwelling values slipping 0.2% lower in December; the first monthly fall recorded since February 2016.
The housing market has been far more resilient to negative growth compared with Sydney due to factors such as stronger population growth, lower affordability hurdles and a higher rate of jobs growth, however the growth has been clearly moderating
Since late 2016 and Melbourne’s annual rate of capital gain, at 8.9%, has fallen below double digits for the first time in eleven months.
For Brisbane the housing market continued along a steady growth trajectory with dwelling values unchanged in December and only 0.3% higher over the December quarter.
Annual capital gains are only slightly higher than inflation, tracking at 2.4% over the calendar year.
The performance gap between houses and units is stark across Brisbane, with house values up 3.1% over the year while unit values have slipped 1.2% lower.
The decline in unit values can be attributed to concerns around oversupply in key sectors of the Brisbane market.
Conditions across the Adelaide housing market remained stable with dwelling values continuing to edge higher, up 0.2% month-on-month and 0.3% over the final quarter of 2017 to be 3.0% higher over the year.
In Perth, the housing market remained soft, however the rate of decline continued to improve with the annual fall at-2.3%; the smallest year-on-year drop since May2015.
The improving conditions are most visible across Perth’s unit sector, where values are up 0.4% over the December quarter and supply issues are generally healthier relative to Perth’s detached housing market.
The best performing capital city over the 2017 calendar year was Hobart, where dwelling values rose by 12.3% : almost five times higher than Hobart’s decade average annual rate of capital gain (2.5%).
Despite the strong capital gains, housing prices remain extremely low in Hobart relative to the larger mainland capital cities, with the median house value tracking at $424,251; 54% ($634,000) lower than Sydney values and 49% ($408,000) lower than Melbourne.
Canberra dwelling values edged 0.2% higher in December to be up 1.0% over the final quarter of the year and 4.9% higher throughout 2017. Houses are rising at more than double the rate of unit values, with house values up 5.8% over the year while unit values are only just beating inflation at 2.1%.
Across the regional markets of Australia conditions remain diverse. Dwelling values continued to trend lower in 2017 across regional Western Australia (-4.3%) while values were steady across regional South Australia (-0.1%) and up across the remaining ‘rest of state’ areas.
Regional New South Wales stands out as offering up the best capital gains, with dwelling values up 7.4% over the calendar year while values across regional Victoria were 4.2% higher.
The Newcastle and Lake Macquarie areas in New South Wales has seen the strongest capital gains of any regional market, followed by Southern Highlands and Shoalhaven (+10.3%) and Geelong(9.7%).
The weakest regional markets continue to be in Australia’s outback regions and areas dependent on the mining sector.
The largest fall in dwelling values over 2017 was recorded in Outback Queensland, a region which encompasses a vast but sparsely populated area of western Queensland, where dwelling values were down 14.3% in 2017.
Rounding out the top five for largest value falls across the regional areas of Australia were:
DarlingDowns–Maranoa in Queensland (-8.2%), Outback South and Outback Northern Western Australia (-7.6% and-7.3%) and Townsville in Queensland (-5.6%).
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