May Market Outlook

May Outlook

Cameron Kusher, CoreLogic Research Analyst

May 2018

Dwelling values nationally fell for their seventh consecutive month in April 2018 according to the CoreLogic Home Value Index results.  The declines continue to be driven by capital cities with the combined capital cities recording value declines for each of the past seven months while combined regional market values have continued to see values climb.  Over the month, national dwelling values fell by -0.1% with a -0.3% fall across the combined capital cities and a 0.4% rise across the combined regional markets.

Looking at the individual capital cities and rest of state regions, values fell over the month in Sydney, Melbourne and Brisbane, while they were unchanged in Perth.  All other capital city and rest of state regions recorded an increase in values in April 2018.

Throughout the three months to April 2018, national dwelling values recorded a -0.3% decline. This weakness was again being driven by the combined capital cities with values -0.7% lower over the three month period compared to a 1.3% lift in values across the combined regional markets of the country.

Over the past three months, across the individual capital cities, values have fallen in Sydney (-1.2%), Melbourne (-0.7%), Brisbane (-0.1%) and Adelaide (-0.2%) while they have increased in Perth (0.1%), Hobart (3.6%), Darwin (0.7%) and Canberra (0.5%).  Values were higher over the three month period across each of the regional markets with the increases recorded at: 1.3% in regional NSW, 1.5% in regional Vic, 1.0% in regional Qld, 0.9% in regional SA, 1.3% in regional WA, 2.8% in regional Tas and 1.6% in regional NT.  Comparing growth in values between capital cities and their rest of state regions, Hobart was the only capital city in which value growth was stronger than the corresponding regional market.

National dwelling values have increased by 0.2% over the 12 months to April 2018 which was the slowest annual rate of growth since October 2012 and substantially lower than the 9.9% annual growth a year earlier.  Values across the combined capital cities fell by -0.3% over the past 12 months which was their largest decline since September 2012.  To put this decline into some perspective, a year ago values had increased by 11.0% over the previous 12 months.  Across the combined regional markets, values continue to rise but the rate of growth has slowed to 2.4%; its lowest rate since May 2015 and well down on the 5.8% in April 2017.

Throughout the capital cities, dwelling values have fallen over the past year in Sydney (-3.4%), Perth
(-2.3%) and Darwin (-7.7%).   For Sydney, it was the largest annual decline in values since April 2009.  Across the remaining capital cities, values increased over the year in Melbourne (3.7%), Brisbane (0.9%), Adelaide (0.8%), Hobart (12.7%) and Canberra (2.6%).  In Melbourne, annual value growth was the slowest it has been since April 2013 and in Brisbane it was the slowest since March 2013.  Adelaide’s value growth was the slowest since July 2013 and Canberra’s value growth was the slowest since June 2016.  Even though the capital city housing market slowdown is predominately occurring in Sydney and Melbourne, growth in other capital cities is also slowing.  Across the regional markets, values have fallen over the year in regional SA (-1.4%) and regional WA (-4.3%) while they have increased in regional NSW (4.7%), regional Vic (4.2%), regional Qld (0.2%), regional Tas (5.9%) and regional NT (0.5%).

With values now falling across the nation, many of the capital cities and some of the regional markets have seen values fall below their historic peaks.  Of course in markets like Perth, Darwin, regional Qld, regional WA and regional NT this has been the case for some time, but elsewhere it is a relatively recent occurrence.  Nationally, dwelling values peaked in September 2017 and have since fallen by -1.0%.  Combined capital city values are -1.7% lower than their September 2017 peak, while combined regional market values currently sit at their historic high.

Across the individual capital cities, dwelling values are currently at an historic high in Hobart and Canberra but sit below their peak elsewhere.  Sydney values are -4.3% lower than their July 2017 peak.  Melbourne values peaked in November 2017 and have since fallen by -1.1%.  Brisbane values are currently -0.1% lower than their December 2017 peak.  Adelaide values have fallen by -0.4% from their December 2017 peak.  Perth and Darwin have been recording value falls for a number of years now with Perth values -10.8% lower than their June 2014 peak and Darwin values -21.1% lower than their May 2014 peak.  Across the rest of state markets, values remain at historic highs in regional NSW, regional Vic and regional Tas.  Regional Qld values are -4.5% lower than their March 2008 peak while regional SA values are -4.7% lower than their April 2011 peak.  In regional WA, values are currently -28.6% lower than their January 2008 peak and in regional NT values are -8.2% lower than their October 2014 peak.  With value growth slowing, particularly in capital city markets, it is anticipated that values will continue to move further away from their peaks in most capital cities over the coming months.

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 more empowered.  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.

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.  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.

Dwelling values in Brisbane are slightly below their peak with the annual rate of growth showing a modest slowdown.  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 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 two 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 each of the past two months but they remain 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 rose in Canberra over the month while the annual rate of value growth is slowing for the city.  The expectation is that values will continue to rise at a fairly slow pace over the coming months.

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