June Market Outlook

June Outlook

Cameron Kusher, CoreLogic Research Analyst

June 2018

The CoreLogic Home Value Index results for May 2018 showed that national dwelling values fell for their eighth consecutive month.  Over the month, national dwelling values fell by -0.1% with combined capital city dwelling values falling by -0.2% and combined regional market values increasing by 0.2%.  The falls in national dwelling values, at this stage, are being driven by the performance of the combined capital cities rather than the combined regional housing markets.

Throughout the individual capital cities, values recorded a month-on-month fall in Sydney (-0.2%), Melbourne (-0.5%), Perth (-0.1%), Darwin (-0.2%) and Canberra (-0.1%) while they increased in Brisbane (+0.2%), Adelaide (+0.5%) and Hobart (+0.8%).  Values increased over the month in each rest of state region except WA (-0.6%) with increases of: +0.1% in regional NSW, +0.4% in regional Vic, +0.2% in regional Qld, +0.3% in regional SA, +0.8% in regional Tas and +2.8% in regional NT.

National dwelling values fell by -0.3% over the three months to May 2018 with combined capital city dwelling values falling -0.6% while combined regional market values rose 1.0%.  Looking at the individual capital cities, values were lower over the period in Sydney (-0.9%) and Melbourne (-1.2%) while they increased across all other capitals: Brisbane (+0.2%), Adelaide (+0.3%), Perth (+0.1%), Hobart (+3.7%), Darwin (+1.3%) and Canberra (+0.8%).  In the regional markets no regions recorded a fall over the past three months, with increases recorded at: +1.0% for regional NSW, +1.5% for regional Vic, +0.6% in regional Qld, +0.3% in regional SA, +1.6% for regional WA, +2.3% in regional Tas and +3.4% across regional NT.

Over the past year, dwelling values have fallen by -0.4% across the nation.  This was the first annual decline since October 2012 and the greatest fall since September 2012.  Combined capital city dwelling values fell by -1.1% over the past year, their greatest decline since August 2012.  Combined regional market dwelling values increased by 2.2% over the year and although values are still rising it was the slowest rate of growth since April 2015.  Over the past year, dwelling values have fallen in Sydney (-4.2%), Perth (-1.8%), Darwin (-7.9%), regional SA (-2.5%) and regional WA (-3.9%).  Over the same period, dwelling values have increased in Melbourne (+2.2%), Brisbane (+0.9%), Adelaide (+0.6%), Hobart (+12.7%), Canberra (+2.3%), regional NSW (+3.9%), regional Vic (+4.5%), regional Qld (+0.4%), regional Tas (+5.9%) and regional NT (+4.7%).

Since national dwelling values peaked in September 2017, they have fallen by -1.1% to May 2018.   While combined capital city dwelling values are now -1.9% lower than their peak, combined regional market dwelling values have continued to climb and sit at an historic high.  Across the capital cities, dwelling values are currently at historic highs in Brisbane, Adelaide, and Hobart while they are lower in Sydney (-4.5%), Melbourne (-1.6%), Perth (-10.9%), Darwin (-21.3%) and Canberra (-0.1%).  Outside of the capital cities, values are at an historic high in regional NSW, regional Vic and regional Tas while they are lower in regional Qld (-4.3%), regional SA (-4.4%), regional WA (-29.0%) and regional NT (-5.7%).

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.  Given this, it is anticipated that dwelling values will continue to fall over the coming months.  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 grow.

Dwelling values in Brisbane are continuing to rise albeit at a fairly slow pace and slower than the already modest growth rates over recent years.  Although value growth has been minimal over recent years it is anticipated that values will be quite flat over the coming months in Brisbane. 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 over recent months 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 recent months 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.  Although values in regional WA have increased over the past three months, values are lower over the year and further moderate falls are anticipated with the improvement in Perth taking 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.

Darwin values rose over the past three months but they remain much lower over the year.  We are expecting weak housing market conditions to persist over the coming months, however it seems as if the worst of the declines may be in the past.  While Darwin values are lower over the year, regional Northern Territory values are slightly higher. It is expected that conditions will be relatively flat over the coming months in regional Northern Territory.

Values fell in Canberra over the month and the annual rate of value growth is slowing for the city.  The expectation is that values will remain fairly flat over the coming months.

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