With values falling nationally, has there been any significant improvement in affordability?

According to the latest CoreLogic Home Value Index results for October 2018, national dwelling values have fallen by -3.5% over the past year and are -3.5% lower than their peak. 

Although this is a pretty moderate fall it is interesting to take a look at what this means and where values sit historically.

Dwelling

A -3.5% decline in national dwelling values from their peak to October 2018 means that values are now the lowest they’ve been since January 2017.

Given this, if you’ve purchased a property any time since January 2017 it is likely that your property is worth less than you paid for it.

While home owners don’t like to see the value of their assets falling, to put this into perspective values are still 44.8% higher over the past decade and 209.9% higher over the past 20 years.

Dwelling2

In Sydney, dwelling values have recorded their largest annual decline since February 1990, falling by -7.4% over the year to October 2018 and now sitting -8.2% lower than their peak in July 2017.

The Sydney dwelling value index is currently the lowest it has been since September 2016.

Although values are currently falling, they are still 81.4% higher over the past decade and 220.1% higher over the past 20 years.

Dwelling3

Dwelling values in Melbourne peaked in November 2017 and to October 2018 have fallen by -4.9%.

The Melbourne index is now at its lowest level since March 2017.

Over the 10 years to October 2018, values in Melbourne have increased by 74.7% and they are 295.4% higher over the past 20 years.

Based on this data, most home owners are still ahead however, recent buyers are likely to have seen values slip below the purchase price.

Dwelling4

Following a peak in April 2018, Brisbane dwelling values have fallen by -0.3% to October 2018.

Although falls have only been moderate to date, values are at levels last seen in Brisbane in February 2018.

A big difference between Brisbane and Sydney and Melbourne is that Brisbane has seen very little value growth over the past decade (16.1%) however, values are 185.3% higher than they were two decades ago.

Dwelling5

Adelaide dwelling values sit at record high levels as at October 2018.

Although values are continuing to climb the rate of growth is moderate at just 1.8% over the past year.

Like Brisbane, Adelaide has seen very little value growth over the past decade, up by 23.7% with values 198.6% higher over the past two decades.

Dwelling6

Perth’s housing market has been in the midst of a correction since 2014 with dwelling values currently -14.2% lower than their June 2014 peak.

Based on index values, current values are the lowest they’ve been since June 2009.

This means many recent buyers are in a position whereby the current value is lower than what they paid.

Over the past decade, values in Perth are -1.1% lower however, the previous decade was much stronger for value growth resulting in 20 year growth of 159.0%.

Dwelling7

Values have been rising at a rapid rate in Hobart over recent years and although the rate of growth has slowed a little of late, they remain at an historic high level.

Over the past decade, values in Hobart have increased by 42.9% with value growth much stronger over the previous 10 years with an increase of 230.0% over the past two decades.

Dwelling8

Darwin has seen a substantial correction in housing values over recent years and as at October 2018, values were -23.6% lower than their May 2014 peak.

The last time dwelling values were as low as they are currently was November 2007.

This means anyone that has purchased over the past decade is likely to have a current home value lower than the purchase price.

This is reflected by the fact that values are -3.1% lower over the past decade.

NT housing data is only available from 1999 so over the 19 years to October 2018, values in Darwin are 77.8% higher.

Dwelling9

Dwelling values in Canberra are continuing to rise and sit at historic high levels however, the rate of growth has slowed of late.

Over the past 10 years, Canberra dwelling values have lifted 35.4% and over the past 20 years values are up 233.6%. 

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Although values in Sydney and Melbourne are seeing accelerating rates of decline, in the context of the run-up in values over recent years it has not greatly improved affordability.

In fact in both cities values have only returned to levels seen a couple of years ago.

CoreLogic expects values to continue declining over the coming months however, it is unlikely that these falls will make any significant improvement to affordability, especially in the absence of real income growth.

Although, if the declines continue for a number of years we could see a more substantial improvement in affordability as per what has occurred in Perth and Darwin following four years of ongoing value falls.

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About

Cameron Kusher is Corelogic RP Data’s senior research analyst. Cameron has a thorough understanding of the fundamentals such as demographics, trends & economics. Visit www.corelogic.com.au


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