House values dragged down in latest index

By Paul Hemsley

May 03 2022
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A new set of figures outlining the present state of Australia’s residential property market has been released, indicating a bleak outlook for growth in metropolitan areas as the Reserve Bank of Australia (RBA) is under pressure to set its first interest rate hike in more than a decade.

The latest data in CoreLogic’s Home Value Index (HVI) points to a major slowdown for cities across Australia, especially Sydney and Melbourne, which have hit their first quarter of negative territory since the COVID-19 lockdowns of 2020.

The HVI figures indicating a nationwide market slowdown are backed by a deeply complex set of catalysts, which CoreLogic’s research director Tim Lawless cites as stretched housing affordability, higher fixed term mortgage rates, a rise in listing numbers across some cities and lower consumer sentiment.

Mr Lawless warned that if the RBA sets a hike in the cash rate, there will likely be a further loss of momentum in housing conditions over the remainder of the year and into 2023.

“As the cash rate rises, variable mortgage rates will also trend higher, reducing borrowing capacity and impacting borrower serviceability assessments,” Mr Lawless said.

The figures in the HVI illustrate a declining monthly rate of growth at 0.6 per cent - the lowest reading since October 2020.

According to CoreLogic, Sydney and Melbourne had the heaviest weighing in the HVI, and were the “main drag” on the headline growth rates – Sydney housing values were down by 0.2 per cent, Melbourne dropped by 0.04 per cent, and Hobart showed its first monthly fall in 22 months of 0.3 per cent.

Other cities across Australia fared slightly better, including Adelaide at 1.9 per cent growth in April, as well as Brisbane at 1.7 per cent, Canberra at 1.3 per cent, and Perth at 1.1 per cent. Although these cities indicate higher growth rates than Sydney and Melbourne, Mr Lawless warned the trend rate of growth is “easing” in most of these areas as well.

Based on rolling quarterly change, Brisbane dwellings moved through a peak rate of growth in December 2021 at 8.5 per cent, slowing to 5.7 per cent over the most recent three-month period. Similarly, Adelaide moved through a peak in the trend rate of growth in January at 7.4 per cent, reducing to 5.4 per cent in April.

But Perth and Darwin are a tale of two cities that have bucked the trend set by the others, where the rolling quarterly trend has gathered some steam since late 2021. Perth housing values were up 2.4 per cent over the three months ending April compared with a recent lull through late last year when the quarterly trend fell to just 0.4 per cent.

Mr Lawless said a rebound in migration rates as state and international borders reopened could partially explain the “renewed exuberance”, along with persistently low advertised stock levels and strong economic conditions.

“While ABS internal migration data by greater capital city is currently only reported to June 2021, the data points to a vast uplift in internal migration to Perth for the year (6,468), a substantial turn-around from the previous four-year average (-3,735).”

While Australian cities are evidently struggling with their housing values, the regional Australian housing markets have told a more upbeat story, having been “somewhat insulated” from the nationwide slowdown, according to CoreLogic.

The figures for the regions show housing values up 1.4 per cent in April across the combined regionals index, compared with a 0.3 per cent gain across the combined capitals.

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