While Dwelling values fall – the rate of decline continues to ease

The decline in home values has lost some momentum over recent months as falling values lose steam in Sydney and Melbourne.

Simultaneously, more regions across the country saw housing values slip lower as the downturn becomes more geographically diverse.

Dwelling values across Australia continued their downward trajectory in April, falling by half a percent over the month to be down -7.2% over the past twelve months and -7.9% lower since peaking in September 2017.

Although housing values are broadly trending lower, the rate of decline has been easing since moving through a monthly low point in December last year when national dwelling values fell -1.1%.

Index

The improvement in the rate of decline is attributable to an easing in the market downturn across Sydney and Melbourne where values were previously falling much faster.

In December last year, Sydney dwelling values were down -1.8%, with the pace of month-on-month falls progressively moderating back to -0.7% in April.

Hand Drawing A Graph About Real Estate Market Concept Image

Similarly, Melbourne values were down -1.5% in December, with the rate of decline improving to -0.6% in April.

Other property market insights supporting a subtle improvement in housing market conditions include a rise in mortgage related valuations activity (as indicated by CoreLogic platform data), an improvement in ABS household finance data for February, and the fact that auction clearance rates are holding around the mid-50% range across the major auction markets.

While none of these indicators could be described as strong, the current trend in the data implies that housing market conditions may have moved through the worst of the downturn.

Highlights

In April, dwelling values fell across every capital city apart from Canberra, while regional areas of Tasmania, Victoria and South Australia also avoided a fall.

The broad-based nature of lower housing values highlights that while the rate of decline has eased, the geographic scope of lower dwelling values remains broad.

Values were down by -0.9% in Hobart, signaling a weakening across what has been one of the strongest capital city markets for value gains and leaving Canberra as the only capital city where dwelling values were up over the month.

Annually, national dwelling values were down -7.2%; the largest annual fall since the twelve months ending February 2009, which was associated with the Global Financial Crisis.

Change In Dwelling

Across the capital cities, Sydney (-10.9%) and Melbourne (-10.0%) are both now recording double-digit annual declines, followed by Perth (-8.3%) and Darwin (-7.1%).

property investors

The largest gains are in Hobart (+3.8%) and Canberra (+2.5%), while Adelaide is the only other capital city to remain in the black over the past twelve months (+0.3%).

Across the broad valuation cohorts, the most expensive quarter of the housing market in Melbourne (-13.7%) and Sydney (-11.8%) are continuing to record the largest annual declines, while most other cities are recording less variance between the upper and lower quartiles of the market.

The smaller declines across the lower quartile of Sydney and Melbourne housing markets can be explained by some support from first homebuyers who are a larger proportion of the market relative to prior years, and more focus from lenders around reducing exposure to borrowers with high debt levels relative to their incomes.

Markets where housing affordability is less challenging, such as Darwin and Perth are recording a stronger performance (smaller declines) across the upper quartile, while in Hobart, where housing affordability has deteriorated rapidly, the most affordable quarter of the market continues to return a solid 8.2% rise in values over the past twelve months.

Top 10

Across the 46 capital city SA4 sub-regions, only six areas have avoided an annual fall in dwelling values.

The best conditions can now be found across Hobart and Canberra, as well as regions of Adelaide and Brisbane.

The fact that five of the top ten best performing sub-regions are actually reporting a negative annual result for housing value movements highlights the broad-based nature of this housing downturn.

The weakest capital city sub-regions were generally confined to areas of Sydney and Melbourne, with Perth’s Mandurah also re-appearing in the list of the weakest performing capital city areas. Melbourne’s prestigious Inner East leads the nation in recording the largest value falls, down 15.4% over the past twelve months.

Top 10 2

Across the 42 regional SA4’s of Australia, 17 regions are recording positive annual growth in dwelling values, demonstrating healthier conditions relative to the capital cities.

Buy Home In Australia

Areas of regional Tasmania are showing the strongest growth conditions over the past twelve months, with the South East SA4 up 8.6% and values across the West & North West SA4 up 7.1%, the next strongest growth was in the Riverina region of NSW (+6.4%), where a 8.3% rise in values across the Wagga Wagga region have been the main driver of growth.

Areas of regional Victoria area also well represented on the top performers list, led by Ballarat, where values are 5.9% higher.

The weakest regional sub-regions are confined to the broader outback areas of Queensland and Western Australia as well as the Wheat Belt of Western Australia where weaker agricultural conditions are likely having a negative impact on housing values.

The regions adjacent to Sydney, including Illawarra, Newcastle & Lake Macquarie and the Southern Highlands & Shoalhaven have also recorded substantial falls in value over the past twelve months, following a similar downwards trajectory to the Sydney market.

Dwellign Values

CoreLogic’s national hedonic rental index ticked 0.3% higher in April to be up 0.4% over the past twelve months. 

The Sydney rental market remains the largest drag on national rental growth, with rental rates  falling  -3.1%   over   the   past   twelve  months.

Darwin is the only other capital city where rents are down over the year, falling by -5.6%.

Hobart  rents  are  rising  the  fastest  amongst  the capitals, up 5.7% over the past twelve months due to strong demand coupled with low rental supply.

Although rental markets are generally sluggish, gross rental yields are continuing to recover from their recent record lows.

Nationally, the gross rental yield is recorded at 4.13%, the highest gross yield since May 2015, but still 15 basis points below the decade average of 4.28%.

Each of the capital cities and broad regional rental markets of Australia have recorded either a steady or higher gross yield profile relative to the same time a year ago; a reflection of rents outperforming dwelling values.

Rental Yieldsa

We are seeing further evidence that the worst of the housing market conditions are now behind us.

Values are still broadly declining, however the pace of decline has moderated since December last year and there are some tentative signs that credit flows have improved, albeit from a low base.

Considering that tighter credit conditions were one of the primary catalysts for the housing market downturn, any sign that credit availability is improving would be a welcome outcome for the housing market.

According to the Australian Bureau of Statistics (ABS), lending to households for dwellings (excluding refinancing) was up 2.7% on a seasonally adjusted basis in February.

A rise in CoreLogic valuation platform activity throughout March hints at a further improvement in housing finance, which will likely be reported in the next ABS release. Sydney Market Down

Another indicator of a subtle improvement in the housing market can be seen in auction clearance rates that are holding around the mid-to-low 50% range, albeit on low volumes relative to a year ago.

The correlation between auction results and housing market conditions is strongest in Melbourne and Sydney where auctions comprise a larger proportion of selling activity.

While a mid-50% clearance rate doesn’t suggest housing prices are set to bounce back, it does imply a closer fit between buyer and seller expectations.

Although the rate of decline has moderated, we are still seeing values falling across most regions of Australia, and any recovery in dwelling values is likely to be a long term outlook.

Listing numbers remain elevated across all capital city markets, providing buyers with a wide range of choice, plenty of bargaining power and little in the way of urgency.

Capital city listings haven’t been this high at this time of the year since 2012.

Despite total listing numbers remaining elevated, fresh listings across the combined capitals are down 31% relative to the same time last year, indicating extremely low vendor confidence.

The lower number of new listings entering the market shows there is minimal sign of panicked selling; rather prospective vendors seem to be comfortable in delaying their listing until selling conditions improve.  Sydney Property Market

The prospect for lower interest rates is another factor that could support an improvement in housing market activity later this year.

While borrowers are facing tougher serviceability assessments and scrutiny around their overall debt levels relative to their income and expenses, lower mortgage rates will certainly be a net positive for the housing market.

Mortgage rates are already around the lowest level since the 1960’s and any further reduction is likely to be well received by the market.

The federal election outcome could deliver a wildcard for the housing market.

A change of government could see taxation policies relevant to the housing market rolled back or removed which would be an overall negative for investment demand.

According to the ABS, investors currently comprise only 18.2% of the value of mortgage demand (excluding refi’s), down from 30% in late 2014 and well below the decade average of 25%. A further reduction in investment activity without a commensurate rise in owner occupier activity would likely place further downwards pressure on housing prices, especially across the heavily supplied high density sector of the market.

icon-podcast-large

Subscribe & don’t miss a single episode of Michael Yardney’s podcast

Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.

Need help listening to Michael Yardney’s podcast from your phone or tablet?

We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.

icon-email-large

Prefer to subscribe via email?

Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.


Tim Lawless

About

Tim heads up the Core Logic RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia. Visit www.corelogic.com.au


'While Dwelling values fall – the rate of decline continues to ease' have no comments

Be the first to comment this post!

Would you like to share your thoughts?

Your email address will not be published.
CAPTCHA Image

*


facebook
twitter
google
0
linkedin
0
email