November Market Outlook

November Outlook

by CoreLogic

November 2018

National dwelling values have been falling for 12 consecutive months as at the end of October 2018 according to the CoreLogic home value index.  In fact, over the past five months national dwelling values have averaged a monthly decline of -0.5% each month.  In October, national values fell by -0.5% with declines recorded across both the combined capital cities (-0.6%) and the combined rest of state regions (-0.2%).  The national dwelling index is now -3.5% lower than its peak with values -4.6% lower than their peak across the combined capital cities and -1.2% lower across the combined rest of state regions.

Over the month of October 2018 and across the individual capital cities, values fell in: Sydney and Melbourne (both -0.7%) and Perth (-0.8%) while they were unchanged in all other capital cities except for: Adelaide (0.2%) and Hobart (0.9%).  In the rest of state markets, values fell over the month in regional NSW (-0.5%), regional SA (-0.7%), regional WA (-1.4%) and regional NT (-0.4%) while values increased in regional Vic (0.2%), regional Qld (0.1%) and regional Tas (0.4%).

Throughout the three months to October 2018, national dwelling values fell by -1.4%, while over the same period, combined capital city values were -1.6% lower and combined regional market values had fallen by -0.7%.  Throughout the individual capital cities values fell over the past three months in Sydney (-2.0%), Melbourne (-2.1%), Perth (-2.0%) and Darwin (-0.7%), were unchanged in Brisbane and increased in Adelaide (0.2%), Hobart (1.2%), and Canberra (1.5%).  Across rest of state markets, values increased in Vic (0.5%), Tas (2.5%) and NT (2.2%) while the fell in NSW (-1.3%), Qld (-0.3%), SA (-1.8%) and WA (-3.3%).

National dwelling values have fallen by -3.5% over the 12 months to October 2018 which is their steepest annual fall since February 2012.  Combined capital city dwelling values have fallen by -4.6% over the past year, their greatest fall since April 2009 while combined regional market values are 0.8% higher over the year which is their slowest annual growth since July 2013.  Amongst the capital cities, dwelling values have increased over the past year in Brisbane (0.4%), Adelaide (1.8%), Hobart (9.7%) and Canberra (4.3%) while they have fallen in Sydney (-7.4%), Melbourne (-4.7%), Perth (-3.3%) and Darwin (-2.9%).  In the non-capital city markets, values have fallen over the past year in SA (-0.1%), WA (-6.5%) and NT (-0.4%) while values are higher in NSW (0.2%), Vic (7.1%), Qld (0.1%) and Tas (11.4%).

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 -7.4% lower over the past year and values are -8.2% lower than their previous peak.  The -7.4% annual fall is the largest since February 1990.  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 -1.3% lower over the past year and now -1.9% 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 -4.9% to October 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 -0.3% 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 0.1% higher over the past year but -4.2% 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 1.8% 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 -4.8% 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 and values are now -14.2% 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 continue to fall however, the rate of decline has slowed noticeably over recent months.  Darwin values remain -23.6% lower than they were at their peak however, the -2.9% annual decline is the slowest rate of decline since April 2015 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 4.3%.  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.


DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.