July Market Outlook

July Outlook

Cameron Kusher, CoreLogic Research Analyst

July 2018

  • National dwelling values tracked lower for the ninth consecutive month in June 2018 according to the Core Logic home value index. Over the month, national dwelling values were -0.2% lower taking the cumulative decline in values over the past nine months to -1.3%.  The combined capital cities recorded a fall in values of -0.3% over the month which has resulted in values which are -2.2% lower than their previous peak.  Across the combined regional housing markets, values were unchanged over the month which represented the smallest monthly change in values for eight months.
  • Values fell over the month in Sydney (-0.3%), Melbourne (-0.4%), Perth (-0.5%), Darwin (-1.1%) and Canberra (-0.3%) and they increased in Brisbane (+0.2%), Adelaide (+0.3%) and Hobart (+0.3%). Outside of the capital cities, values fell over the month in regional Qld and regional WA (both -0.5%), were unchanged in regional Tas and regional NT while values rose in regional NSW (+0.2%), regional Vic (+0.6%) and regional SA (+0.4%).
  • Over the second quarter of 2018 national dwelling values fell by -0.5% which was the same rate of decline recorded over the first quarter of the year. Combined capital city dwelling values fell by -0.8% over the second quarter compared to a -0.9% fall over the first quarter and combined regional market values increased by 0.6% over the quarter, slowing from 1.1% over the previous quarter.  Looking at the individual capital cities, values increased over the quarter in Brisbane (+0.3%), Adelaide (+0.9%), Hobart (+0.3%) and Canberra (+0.2%) and fell in Sydney (-0.9%), Melbourne (-1.4%), Perth (-0.7%) and Darwin
    (-0.8%).  Across the regional housing markets values fell over the quarter in regional Qld (-0.2%) and regional WA (-0.1%) while they increased in regional NSW (+0.8%), regional Vic (+1.8%), regional SA (+1.3%), regional Tas (+1.7%) and regional NT (+4.0%).
  • National dwelling values fell by -0.8% over the 2017-18 financial year making it the weakest financial year for value change since 2011-12. The change in values had slowed dramatically from the previous financial year in which national values increased by 10.2%.  Across the combined capital cities, values fell by -1.6% over the financial year which was well down on the 11.1% increase over the previous year and the largest financial year decline since 2011-12. Combined regional market values increased by 2.2% with growth slowing from 6.4% a year earlier and the slowest financial year growth since 2012-13.
  • Over the financial year, values have fallen in Sydney (-4.5%), Perth (-2.1%) and Darwin (-7.7%) and increased in Melbourne (+1.0%), Brisbane (+1.1%), Adelaide (+1.1%), Hobart (+12.7%) and Canberra (+2.3%). Perth was the only capital city in which the change in values over the past financial year was greater than the previous financial year.  Sydney and Melbourne in particular have seen substantial slowdowns following value increases of +16.4% and +13.0% respectively over the 2016-17 financial year.  In fact, based on data from 1980 it was the weakest financial year for value changes on record in Sydney.
  • Annual growth rates have more than halved over the year in Brisbane, Adelaide and Canberra.  Throughout the regional markets only regional SA (-0.1%) and regional WA (-3.3%) recorded value falls over the financial year while each of regional NSW (+3.2%), regional Vic (+5.0%), regional Qld (+0.3%), regional Tas (+5.6%) and regional NT (+4.8%) recorded value increases.  By comparison to the previous financial year, value growth was stronger in regional Vic and regional NT while the rate of decline slowed in regional SA.  Regional NSW recorded a significant slowing of growth from 11.9% a year earlier and in regional Qld the rate of growth has more than halved from 3.5% a year ago.
  • Let’s take a look at our outlook for the capital city and rest of state markets over the coming months.
  • In Sydney, values are falling, a trend which has been ongoing since July last year. Market conditions have favoured sellers for much of the past six years however, increased stock for sale and stretched affordability means that buyers are now more empowered than sellers. Interestingly, recent data suggests home owners are starting to respond with far fewer new properties coming to the market relative to recent years.  Despite this, it is anticipated that dwelling values will continue to fall over the coming months on the back of tight credit conditions and reducing investor demand.  Outside of Sydney, regional markets are continuing to see values increase broadly however, these regions are also experiencing a slowdown in growth.  In regional New South Wales values are expected to continue to rise over the coming months however, the pace of growth is anticipated to slow.  The slowing in growth is already becoming evident in those regional markets that are close to Sydney.
  • Melbourne dwelling values are falling but at a more moderate pace compared to Sydney. An increase in the volume of stock for sale and reduced affordability over recent years has contributed to the slowdown with higher value housing stock recording larger falls than the more affordable stock.  Like Sydney, buyers in Melbourne have more choice and are now much more empowered in negotiations than they have been over recent years.  Values are expected to continue to fall moderately over the coming months in Melbourne.  Values are rising in regional Victoria and the rate of growth has remained fairly steady over recent months, a trend which we expect to continue over the coming months as Melbourne softens, housing demand in regional areas close to Melbourne is likely to continue to grow.
  • Dwelling values in Brisbane are continuing to rise at a sustainable pace, although the rate of capital gain has tapered over the past eighteen months. Although value growth has been minimal over recent years it is anticipated that values will be quite flat over the coming months in Brisbane, 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 fairly slow pace, a trend that is expected to continue, with the strongest growth anticipated to occur in south-east Queensland regions of the state.
  • Values in Adelaide have been virtually unchanged for nine months now. Although values are slightly higher over the past year it is expected that the recent trend of fairly flat market conditions will remain over the coming months.  Values in regional South Australia have trended lower recently and we expect that values are likely to be very little changed over the coming months.
  • The Perth housing market appears to have flattened out over the first half of 2018 with some months showing moderate value increases and some showing moderate falls. It’s anticipated that these trends will continue with fairly flat market conditions over the coming months.  Values in regional WA are continuing to trend lower and, despite the potential for a stabilisation of Perth’s housing market and improvement, it is likely to take some time to flow through to these regional areas.
  • Hobart is overwhelmingly the strongest market for value growth currently, a position it is expected to continue to hold over the coming months. Low stock levels and strong demand continue to fuel growth in the market.  Values are also rising in regional Tasmania with these increases expected to also continue over the coming months.
  • We are expecting weak housing market conditions in Darwin to persist over the coming months. While Darwin values are lower over the year, regional Northern Territory values are higher. It is expected that conditions will be relatively flat over the coming months in regional Northern Territory.
  • Canberra has seen the rate of value growth slow substantially over the past year. While value growth has slowed, population growth is increasing which should support housing demand.  We expect dwelling values to continue to rise at a moderate pace over the coming months.

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