August Market Outlook

August Outlook

Cameron Kusher, CoreLogic Research Analyst

August 2018

According to the CoreLogic home value index, national dwelling values fell by -0.6% in July 2018 which was the 10th consecutive monthly fall in values and it was also the largest monthly fall since September 2011.  Values were lower over the month across both the combined capital cities and combined regional markets falling -0.6% and -0.4% respectively.

For the combined capital cities it was the largest monthly fall since February 2016 while across the combined capital cities it was the largest monthly decline since December 2011.  Combined capital city dwelling values have been trending lower since September 2016 while combined regional market dwelling values have fallen over each of the past two months.

  • In the capital cities, monthly value falls were recorded in: Sydney (-0.6%), Melbourne (-0.9%), Adelaide (-0.1%) and Perth (-0.8%), values were unchanged in Hobart and they increased in Brisbane (0.1%), Darwin (0.4%) and Canberra (0.2%). Outside of the capital cities, values were lower over the month in regional areas of NSW (-0.5%), Vic (-0.1%), Qld (-0.3%), WA (-2.4%) and NT (-0.4%) and they rose in the regional areas of SA (0.1%) and Tas (0.1%).
  • The -0.9% fall in national dwelling values over the three months to July 2018 was the largest decline since January 2012. Throughout the combined capital cities values were -1.1% lower over the past three months and combined regional markets were -0.2% lower.  The -1.1% fall in combined capital city values was the greatest decline since January 2012 while the -0.2% fall in regional market values was the largest fall since October 2014.  Across the capital cities, values fell over the past three months in Sydney (-1.1%), Melbourne (-1.8%), Perth (-1.5%), Darwin (-1.0%) and Canberra (-0.2%) while values increased in Brisbane (0.5%), Adelaide (0.7%) and Hobart (1.1%).  Across regional markets, values increased over the past three months in Vic (1.0%), SA (0.9%), Tas (0.9%) and NT (2.4%) while they fell in regional areas of NSW (-0.2%), Qld (-0.6%) and WA (-3.5%).
  • The -1.6% fall in dwelling values over the 12 months to July 2018 was the largest annual fall in values since August 2012. Throughout the combined capital cities values were -2.4% lower over the year while values increased by 1.6% across the combined regional markets.  The -2.4% annual fall in capital city dwelling values was the greatest fall since July 2012 while the rate of growth across the combined regional markets was the slowest since September 2013.
  • Throughout the individual capital cities, values have increased over the past year in Brisbane (1.2%), Adelaide (0.7%), Hobart (11.5%) and Canberra (2.4%) while values were lower over the year in Sydney (-5.4%), Melbourne (-0.5%), Perth (-2.3%) and Darwin (-6.2%). Each capital city except for Perth has seen weaker housing market conditions, in terms of annual value change, compared to a year ago.  In terms of the regional areas of the country, values fell over the past year in WA (-4.8%), where unchanged in SA while they increased in NSW (2.1%), Vic (4.9%), Qld (0.2%), Tas (5.9%) and NT (4.7%).  SA and NT were the only rest of state markets recording superior annual value change conditions compared to a year ago.

Let’s take a look at our outlook for the capital city and rest of state markets over the coming months.

After the market peaked in July 2017, dwelling values in Sydney have fallen by -5.4% over the past year which is their largest annual decline since March 2009.  Affordability across the city remains stretched and the volume of stock listed for sale remains elevated compared to recent years.  Furthermore, investors have been a major source of Sydney housing demand and their activity continues to wane.  For these reasons, we expect values to continue to fall in Sydney over the coming months.  Values in regional NSW appear to be following Sydney values lower, albeit at a slower pace with value having fallen by -0.5% over the month with a slowing of growth having been a consistent market feature of late.  Values are already declining in some of the more expensive regional markets near Sydney and this is a trend anticipated to continue.

After a deceleration of growth in Melbourne dwelling values over the past year, values across the city have now fallen by -2.9% from their peak in November 2017.  Melbourne has experienced stretched affordability, substantial new housing supply and heightened levels of investor activity over recent years.  More recently, an increase in the volume of stock available at a time of tightened credit and reduced investor activity is contributing to the falls in dwelling values.  The decline in values is expected to continue in Melbourne over the coming months.  In regional Vic housing conditions remain more robust than those in Melbourne do however; values fell marginally over the month.  It’s too early to tell whether this is a trend however, the expectation is that values will trend higher in regional Vic over the coming months and it will continue to outperform the capital city.

  • Brisbane is continuing to see values increase however; the rate of growth is slow. In fact, Brisbane values haven’t increased at an annual rate of more than 4% since May 2016.  The expectation is that values in Brisbane will continue to rise at a slow pace over the coming months.  The positives for the market are improving job creation, affordability and increasing interstate migration, which could fuel increased housing demand and start to push values higher. In regional Qld, values are also rising at a slow pace, a trend that is expected to continue, with the strongest growth anticipated to occur in southeast Queensland regions of the state.
  • Adelaide values fell by -0.1% in July however, values have largely been unchanged throughout 2018 with values rising just 0.4% over the first seven months of the year. Although Adelaide is the most affordable mainland capital city, the weaker economic conditions are likely to contribute to limited value growth in the city over the coming months.  It is a similar story in regional SA, where affordable housing is plentiful but there are few economic drivers, which indicate that the market is likely to see only moderate increases in values over the coming months.
  • Dwelling values continue to fall in Perth however, it was the only capital city in which annual value changes were stronger over the past year than the previous year (although values are still declining). Although values are, still falling, sales volumes have largely stabilised of late.  Over the coming months, the expectation is that values will be flat to slightly falling in Perth.  It is a similar story in regional WA with values continuing to fall at a slow pace, a trend that is expected to continue over the coming months.
  • Although Hobart is seeing much higher value growth than all other capital cities and regional markets, there are some signs that things may be starting to slow. Considering the cost of housing in Hobart is now similar to much larger cities such as Adelaide and Hobart any near-term slowdown is not really a surprise.  Over the past few months, there has been a notable slowdown in value growth and slower growth conditions or even potentially some falls are a possibility over the coming months.  Value growth has also slowed over recent months in regional TAS and slow value growth conditions are anticipated over the coming months.

Over recent months, there has been some volatility in value movements in Darwin with rises and falls occurring regularly.  On a trend, basis values are continuing to decline in Darwin, which is expected to continue over the coming months.  While the trend is towards lower values in Darwin in regional NT values are trending higher which is expected to continue albeit at a potentially slower pace.

There has been a noticeable slowdown in value growth in Canberra over recent years.  While values growth has slowed, they continue to trend higher and this is expected to continue over the coming months.


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