September Market Outlook

September Outlook

Cameron Kusher, CoreLogic Research Analyst

September 2018

As at the end of August 2018, national dwelling values have now been declining for 11 consecutive months according to the CoreLogic home value index.  Over the month, national dwelling values have fallen by -0.3% with declines recorded across both the combined capital cities and the combined regional markets.  Nationally, dwelling values are now -2.2% lower than their September 2017 peak.  Combined capital city dwelling values fell by -0.4% over the month to be -3.1% lower than their September 2017 peak. Combined regional market values have fallen by -0.2% over the month and are -0.6% lower than their May 2018 peak.

Across the individual capital cities, values have fallen over the past month in: Sydney (-0.3%), Melbourne (-0.6%), Brisbane (-0.2%), Perth (-0.6%) and Hobart (-0.1%) while values rose in Adelaide (0.3%), Darwin (0.1%) and Canberra (0.5%).  In non-capital city markets, values have increased over the month in: regional SA (1.3%), regional Tas (1.3%) and regional NT (0.3%) while values fell in regional areas of NSW (-0.5%), Qld (-0.2%) and WA (-0.6%) while values were unchanged in regional Vic.

National dwelling values have declined by -1.1% over the three months to August 2018 which is the largest decline in values over a three month period since January 2012.  Over the same period, combined capital city dwelling values were -1.2% lower compared to a -0.6% fall across the combined regional markets.  The quarterly value falls for both the combined capital cities and combined regional markets was the largest since January 2012.  Across the capital cities, values have increased over the past three months in Brisbane (0.1%), Adelaide (0.5%), Hobart (0.1%) and Canberra (0.4%) while they have fallen in Sydney (-1.2%), Melbourne (-2.0%), Perth (-1.9%) and Darwin (-0.7%).  In regional areas of each state values have fallen over the past three months in NSW (-0.8%), Qld (-1.0%), WA (-3.5%) and NT (-0.1%) while they have increased in Vic (0.6%), SA (1.9%) and Tas (1.5%).

Dwelling values at a national level have fallen by -2.0% over the 12 months to August 2018 which is the largest annual decline since July 2012.  Combined capital city dwelling values are -2.9% lower year-on-year while values are 1.6% higher over the past year across regional housing markets.  Both the capital cities and regional markets have seen significant slowdowns in annual growth from a year ago when values were 9.7% and 5.8% higher respectively.

Brisbane (0.9%), Adelaide (1.0%), Hobart (10.7%) and Canberra (2.3%) have recorded an increase in values over the past year while the remaining capital cities: Sydney (-5.6%), Melbourne (-1.7%), Perth (-2.1%) and Darwin (-4.0%), have recorded value declines.  Outside of the capital cities, values have fallen over the year in regional areas of WA (-4.3%) while they have increased over the year in regional areas of NSW (1.4%), Vic (5.7%), Qld (0.4%), SA (2.0%), Tas (8.1%) and NT (5.3%).

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 continued to fall in August and they are now -5.6% lower than they were at their peak in July 2017.  Although values continue to fall, affordability remains stretched while credit availability and demand has reduced and the volume of stock listed for sale remains elevated.  Over recent months, monthly value falls have typically been around 0.3% which is slower than earlier falls however, the expectation is that declines are likely to continue.  In regional NSW dwelling values have now fallen over the past two months taking them -1.0% lower than their peak.  As Sydney continues to see value declines, it is anticipated that regional NSW will also see values fall over the coming months.

Since Melbourne dwelling values peaked in November 2017, they have fallen by -3.5% to August 2018 and over recent months the pace of decline in values has increased.  Tighter credit conditions along with reduced affordability over recent years and an increase in the volume of housing stock listed for sale continues to act as a major influence on the falling values across the city.  CoreLogic expects that these declines will continue throughout the remainder of 2018 and into 2019.  The cost of housing in regional Vic is substantially lower than in Melbourne and values are continuing to increase although the rate of growth has slowed over the month.  It is anticipated that the rate of value growth in regional Vic will be slow relative to the past year however, the expectation is values will continue to rise due to substantially better affordability in regional Vic compared to Melbourne.

Brisbane dwelling values fell by -0.2% in August which follows the recent trend whereby value growth across the city has slowed.  Although Brisbane has seen very little growth over recent years and interstate migration to Qld has accelerated it hasn’t resulted in any substantial change in value growth, in fact, value growth has slowed over the past year.  Although values have fallen over the month the expectation is that Brisbane values will continue to trend higher at a slow pace over the coming months.  Although dwelling values in regional Qld are 0.4% higher over the past year, values have slipped lower over the past three months.  Fairly soft housing market conditions are expected to persist in regional Qld over the coming months.

Dwelling values in Adelaide increased by 0.3% in August and recorded the strongest growth of any capital city over the past three months (0.5%).  The current moderate increases in values across Adelaide are expected to continue over the coming months while an acceleration in the rate of growth seems unlikely.  Values in regional SA have also continued to increase over recent months and much like Adelaide, increases in dwelling values across the region look set to be quite moderate over the coming months.

Dwelling values continue to fall in Perth however, it was the only capital city in which annual value changes were stronger over the past year than the previous year (although values are still declining).  Although values are still falling, sales volumes have largely stabilised of late.  Over the coming months the expectation is that values will continue to decline at a slow pace.  It’s a similar story in regional WA with values continuing to fall at a fairly slow pace, a trend which is expected to continue over the coming months.

Although Hobart is seeing much higher value growth than all other capital cities and regional markets, there are some signs that things may be starting to slow, with values falling over each of the past two months.  Considering the cost of housing in Hobart is now similar to much larger cities such as Adelaide and Hobart, any near-term slowdown isn’t really a surprise.  Over the past few months there has been a notable slowdown in value growth and slower growth conditions or even potentially some falls are a possibility over the coming months.  While Hobart value growth has slowed, dwelling values continue to rise outside of the capital city, a trend which is expected to continue over the coming months.

Over recent months there has been some volatility in value movements in Darwin with rises and falls occurring regularly.  On a trend basis values are continuing to decline in Darwin which is expected to continue over the coming months.  While the trend is towards lower values in Darwin in regional NT values are trending higher which is expected to continue albeit at a fairly slow pace.

There has been a noticeable slowdown in value growth in Canberra over recent years.  While value growth has slowed, they continue to trend higher and this is expected to continue over the coming months.

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