The pace of capital gains across the housing market lost steam over the second half of 2015. Over the first six months of 2015 capital city dwelling values rose by 5.1 per cent and by the end of the calendar year the six -month rate of growth had roughly halved to 2.6 per cent after values reduced by 1.4 per cent over the final quarter of the year.
The slowdown in growth was evident mostly in Sydney and Melbourne, where housing conditions were previously booming, but Perth and Darwin, where market conditions peaked in 2014, are also winding down. In fact, Perth and Darwin were the only two capital cities to record a negative annual movement over the past 12 months. Sydney and Melbourne still stand out as showing the highest capital gains over the past year, with values up 10.5 per cent and 11 per cent respectively; however, both cities recorded a negative movement over the past three months.
As growth conditions wind down, we are seeing conditions around home buying starting to improve. Stock levels, based on the number of homes being advertised for sale, are higher than a year ago across every capital city except Hobart. At the end of January the number of homes available for sale was almost 5 per cent higher than a year ago nationally and 9 per cent higher across the capital cities. This means more choice for buyers and less negotiation leverage for sellers.
Generally, buyers should have more options around properties available to buy; they should have more time to do their research and due diligence; they should be able to negotiate harder to achieve a purchase price that fits their budget. In a market with more buying options, if a vendor is unwilling to budge enough on the contract price, a prospective buyer can more easily move on to another property.
On average our statistics on selling time confirm that homes are taking longer to sell. The average time it took to sell a property in December last year was 41 days compared with 39 days in 2014, and discount rates have increased from 5.7 per cent to 5.9 per cent meaning vendors are starting become more flexible on their price expectations.
When housing market conditions were stronger and values were rising quickly, vendors had all the leverage and buyers had to make their decisions rapidly otherwise there was a high likelihood the home would be sold to another buyer.
Dwelling values may fall further during 2016, however our view is that the downward phase won’t be severe with housing demand buoyed by an ongoing low mortgage rate environment and relatively steady economic conditions.
Tim Lawless, CoreLogic RP Data research director