March Market Outlook

March Outlook

Cameron Kusher, CoreLogic Research Analyst

March 2018

The CoreLogic Home Value Index showed that national dwelling values fell by -0.1% in February 2018.  It was the fifth consecutive month in which values have fallen, taking the cumulative decline since the market peaked in September last year to -0.8%.  There is also a divergence taking place between capital city and regional markets.  Over the month, combined capital city dwelling values fell by -0.3% while combined regional market values increased by 0.4%.

Across the individual capital cities, values were 0.7% higher in Hobart but fell across all other cities.  Across the rest of state areas, values increased over the month in each regional market except for regional Western Australia.  While dwelling values continued to decline in February it should be noted that in most cities the rate of decline slowed over the second half of the month and the monthly declines in Sydney and Melbourne were more moderate than over recent months.

Over the three months to February 2017 national dwelling values fell by -0.8% which was the largest fall over a three month period since January 2012.  Again, weakness was more evident across the combined capital cities than the combined regional markets with quarterly value changes were recorded at -1.2% and +0.9% respectively.  Across the individual capital cities, the quarterly changes in values were recorded at: -2.4% in Sydney, -0.4% in Melbourne, -0.1% in Brisbane, +0.1% in Adelaide, -0.7% in Perth, +3.2% in Hobart, -2.0% in Darwin and -0.2% in Canberra.  Across the rest of state markets, values increased in regional New South Wales (+0.5%), regional Victoria (+2.4%), regional Qld (+0.9%), regional SA (+0.8%), regional Tasmania (+3.8%) and regional Northern Territory (+1.4%) while values fell in regional Western Australia (-2.3%).

Over the 12 months to February 2018 national dwelling values increased by 2.2%, the last time they increased at a slower annual rate was January 2013.  The gap between the performance of the combined capital city and combined regional markets is becoming clearer with annual growth recorded at 2.0% and 2.8% respectively.  The 2.0% annual change in combined capital city values is also the slowest pace of annual growth since January 2013.

At an individual capital city level perhaps the biggest shift is the fact that values have now fallen over the past year in Sydney.  Over the 12 months to February 2018, dwelling values have fallen in Sydney (-0.5%), Perth (-2.7%) and Darwin (-7.4%) while values have increased in Melbourne (6.9%), Brisbane (1.8%), Adelaide (2.2%), Hobart (13.1%) and Canberra (3.2%).  Across the rest of state markets, values rose over the year in regional areas of New South Wales (5.7%), Victoria (4.3%), Queensland (0.5%), Tasmania (5.5%) and Northern Territory (1.6%) while they fell in South Australia (-1.1%) and Western Australia (-6.6%).

Although the declines in values for many regions are relatively recent we are now seeing values below their peak in a number of regions.  Nationally values are -0.8% lower than their September ’17 peak with combined capital city values -1.3% lower while combined regional market values sit at a record high.  Hobart is the only capital city in which values are currently at their historic peak with declines of -3.7% in Sydney, -0.4% in Melbourne, -0.1% in Brisbane, -0.2% in Adelaide, -11.0% in Perth, -22.3% in Darwin and -0.4% in Canberra.  In the regional markets, values are at their peak in New South Wales, Victoria and Tasmania and below their peak in Queensland (-4.9%), South Australia (-4.7%), Western Australia (-30.1%) and Northern Territory (-8.8%).

Nationally, the volume of new stock advertised for sale is -0.5% lower than a year ago while total stock advertised for sale is -3.5%.  When the capital city data is considered there is a clear discrepancy between conditions in capital cities and regional markets, as there is with value growth.  Across the combined capital cities, new stock advertised for sale is 0.4% higher than a year ago and total stock for sale is up 3.6%.

The only capital cities in which newly listed stock for sale is higher than a year ago are Sydney (+6.2%), Melbourne (+1.2%) and Perth (+4.4%) while new listings are lower over the year in Brisbane (-5.5%), Adelaide (-5.7%), Hobart (-21.6%), Darwin (-3.9%) and Canberra (-17.6%).  Importantly, if a comparison is done to other recent years, new listings haven’t been higher than they are currently for this time of year since 2011 in Sydney, since 2016 in Melbourne and since 2016 in Perth.

In terms of total stock advertised for sale across the capital cities, stock levels are higher than a year ago in Sydney (+21.6%), Melbourne (+3.0%) and Adelaide (+0.7%) but lower in Brisbane (-1.6%), Perth (-2.7%), Hobart (-37.4%), Darwin (-2.9%) and Canberra (-3.2%).  Total stock levels in Sydney haven’t been higher than they are currently, at this time of year, since 2012, in Melbourne since 2016 and in Adelaide since 2016.

Let’s take a look at the outlook for each capital city and rest of state region.

With Sydney dwelling values having fallen consistently since the middle of last year they are now -3.7% below their peak.  Macroprudential policies which have made mortgages more difficult and expensive to access, particularly for investors, and deteriorating affordability are clearly drivers of the slowdown.  It is expected that moderate declines in values for Sydney will continue over the coming months.  Outside of Sydney, dwelling values have continued to rise however, regions close to Sydney such as Newcastle and Lake Macquarie and Illawarra have seen the rate of growth slow.  Regional New South Wales is likely to see growth continue to slow a little but is expected to continue to outperform Sydney.

Melbourne dwelling values have fallen for three successive months and are now -0.4% lower than their previous peak.  Although Melbourne values have declined after a long period of growth, the value declines are more moderate than those in Sydney.  Strong migration and affordability relative to Sydney should ensure the declines remain moderate.  In regional Victoria, values are continuing to climb particularly in those regions close to Melbourne.  It is anticipated that these regions will continue to see quite strong increases in values over the coming months.

The Brisbane housing market has seen values fall over each of the first two months of 2017 taking values -0.1% below their peak.  Although values have fallen of late, the expectation is that values will rise at a moderate pace over the coming months.  In regional Queensland, values have continued to climb over the past few months, particularly on the Gold and Sunshine Coasts and Wide Bay regions which is a trend we expect to continue over the coming months.

Values in Adelaide were virtually unchanged over the month and are up 0.1% over the past three months.  Adelaide has been characterised by moderate growth over recent years, a trend we expect to continue over the coming months.  In regional South Australia, values have increased over the past two months and like Adelaide, we expect the trend of moderate growth to continue.

It looked as if the declines in the Perth were moderating late last year however, values have now slipped lower for three consecutive months.  Although we have seen some recent weakness we do anticipate improving conditions in Perth over the coming years following value falls since 2014.  Regional Western Australia is also experiencing value declines although they are much greater than those in Perth, the rate of decline has slowed recently.  While values are expected to continue to fall in regional Western Australia the rate of decline is expected to continue to slow.

Hobart and regional Tasmania are the two strongest markets for value growth currently.  Both are seeing very strong monthly increases in dwelling values which are showing no signs of slowing.  Strong demand and a low supply of stock for sale suggests that both Hobart and regional Tasmania will continue to see quite strong value growth over the coming months.

While Darwin has continued to record declines in dwelling values over recent months, regional Northern Territory values have increased over each of the past two months.  Over the coming months we expect that values will continue to fall in Darwin while regional Northern Territory is expected to see flat to slightly increasing values.

Although Canberra dwelling values have fallen over the past two months the outlook for the market is one of fairly steady, moderate value growth over the coming months.

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