December Market Outlook

December Outlook

by CoreLogic

December 2018

After 13 months of consistent value declines nationally, dwelling values fell again in November 2018 according to the CoreLogic home value index.  The -0.7% fall in national dwelling values in November 2018 was the largest monthly fall in the index since December 2008.  Combined capital city dwelling values were -0.9% lower over the month (also the largest fall since December 2008) and the combined regional markets recorded a fall of -0.1%, however this was a more moderate decline than each of the previous 5 months.  Nationally, dwelling values are now -4.2% lower than their peak with values -5.5% lower across the combined capital cities and -1.3% lower across the combined regional markets.

Across the individual capital cities, dwelling values fell in November in: Sydney (-1.4%), Melbourne (-1.0%) and Perth (-0.7%) while they increased in Brisbane and Adelaide (both 0.1%), Hobart and Darwin (both 0.7%) and Canberra (0.6%).  Outside of the capital cities, values increased over the month in regional areas of: Victoria (0.5%), South Australia and Tasmania (both 0.6%) and Western Australia (0.4%) while they fell in regional areas of New South Wales (-0.3%), Queensland (-0.2%) and Northern Territory (-1.3%).

National dwelling values fell by -1.7% over the three months to November 2018 which was their largest three-month fall since January 2009.  Over the same period, combined capital city dwelling values fell by -2.0% and combined regional area values were -0.6% lower.  Values declined over the past three months in Sydney (-2.8%), Melbourne (-2.4%), Perth (-2.1%), regional New South Wales (-1.2%), regional Queensland (-0.3%), regional South Australia (-1.3%) and regional Western Australia (-2.5%).  Dwelling values were unchanged in regional Northern Territory while they increased in Brisbane (0.1%), Adelaide (0.2%), Hobart (1.7%), Darwin (0.2%), Canberra (1.5%), regional Victoria (0.8%) and regional Tasmania (1.7%).

Over the 12 months to November 2018, national dwelling values have fallen by -4.1% which is their greatest annual fall since December 2011.  Across the combined capital cities, values are -5.3% lower over the year while the combined regional markets have recorded increases of 0.3%.  The -5.3% fall in combined capital city values is the largest since April 2009 while the 0.3% increase in combined regional market values is the smallest rise since February 2013.  The annual changes in values across the individual capital cities have been recorded at: -8.1% in Sydney, -5.8 in Melbourne, 0.3% in Brisbane, 1.4% in Adelaide, -4.2% in Perth, 9.3% in Hobart, -0.8% in Darwin and 4.0% in Canberra.  Across the rest of state markets in each state the annual changes have been recorded at: -0.7% in New South Wales, 6.5% in Victoria, -0.2% in Queensland, -0.1% in South Australia, -6.1% in Western Australia, 11.1% in Tasmania and -0.1% in Northern Territory.

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

Sydney dwelling values have now been falling since July 2017 and are -8.1% lower over the past year and values are -9.5% lower than their previous peak.  The -8.1% annual fall is the largest since May 1983 and the -9.5% fall from peak is only slightly lower than the -9.6% peak to trough falls during the 1991 recession.  Affordability in Sydney remains stretched despite the ongoing values falls and at the same time credit availability has been squeezed and the stock available for sale remains elevated resulting in much more difficult selling conditions.  CoreLogic’s expectations are that Sydney values will continue to decline over the coming months.  Regional NSW appears to be following Sydney’s lead with values -0.7% lower over the past year and now -2.2% lower than their peak.  The outlook for the regional NSW market is also further weakness over the coming months.

Following their peak in November 2017, Melbourne dwelling values have fallen by -5.8% to November 2018 with the pace of falls having gathered pace over recent months.  Much like Sydney, stretched affordability, tighter credit conditions and increased stock for sale is leading to much tougher selling conditions, as a result it is expected that values will continue to fall over the coming months.  Values in regional Vic are continuing to climb, particularly in more affordable housing markets nearby to Melbourne (although Geelong now appears to be slowing).  Overall the expectation is that regional Vic values will continue to climb over the coming months on the back of significantly more affordable housing than Melbourne coupled with reasonably strong demand as migration rates remain high.

In Brisbane, values have shown little change of late and are sitting -0.2% lower than their April 2018 peak.  Brisbane has seen little growth over recent years and remains much more affordable than other capital cities however, tightened credit and a large supply on new units is causing weakness in the market.  The expectation is that housing conditions will remain fairly flat over the coming months.  It is a similar story in regional Qld with values -0.2% lower over the past year and -4.4% below their peak.  Again, the expectation is that over the coming months values will remain fairly flat.

Values in Adelaide continue to rise and are 1.4% higher over the past year.  Adelaide is now the nation’s cheapest capital city for housing and affordability is expected to be a driver of further moderate value growth over the coming months.  Outside of Adelaide values continue to fall and are -4.2% lower than their peak, the weakness in regional SA is expected to persist over coming months.

Late last year it was looking as if the Perth market was getting close to its bottom however, the weakness has returned of late as credit conditions have tightened and values are now -14.8% lower than their peak.  Although Perth is relatively affordable the weaker economy continues to act as a drag on the housing market.  Over the coming months the weaker housing conditions are likely to continue leading to further moderate value falls.  It’s a similar story in regional WA as in Perth and as a result values are expected to decline further over the coming months.

Hobart dwelling values continue to climb however, the rate of growth is not quite as rapid as it has been with monthly increases slowing over recent months.  Hobart always had a big affordability advantage compared to other capital cities however, the past three years has seen that advantage dissolve.  Given this, the slower growth conditions are likely to continue over the coming months, with the monthly rate of growth potentially slowing further.  Regional Tas has also seen rapid growth over recent years and although monthly growth rates have slowed a little of late, they remain much higher than those in Hobart.  Over the coming months regional Tas dwelling values are expected to continue to rise.

Darwin dwelling values increased in November 2018 however, they are lower over the quarter and year although the rate of decline has slowed noticeably over recent months.  Darwin values remain -23.1% lower than they were at their peak however, the -0.8% annual decline is the slowest rate of decline since December 2014 and Darwin was the only capital city in which the annual change this year was superior to last.  The fairly flat to slightly falling conditions are likely to continue over the coming months.  The scenario is quite similar in regional NT with flat to slightly falling values and the expectation is that will continue over the coming months.

Canberra has seen the second highest rate of value growth over the past year of all capital cities at 4.0%.  Although values continue to trend higher, the rate of growth has slowed over recent months which is expected to continue over the coming months with fairly flat housing market conditions.

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