This article is from the Australian Property Journal archive
CORELOGIC’S national home value index has been released, completely detailing the decline that Australia’s housing market has witnessed in the past six months.
Nationally, there has been an annual drop in house prices at 0.9%. Sydney (-8.6%) and Melbourne (-5.6%) have experienced the largest annual drops in their prices as they still sit with Canberra as the three most expensive capital cities in the country.
The decline in the property market has steadied in Sydney and Melbourne however it is currently moving at its quickest in Brisbane. Research director for CoreLogic Tim Lawless says it’s too early to suggest how much more prices will continue to decline.
“Despite the easing in the pace of decline, with Australian borrowers facing the double whammy of further interest rate hikes along with persistently high and rising inflation, there is a genuine risk we could see the rate of decline re-accelerate as interest rates rise further and household balance sheets become more thinly stretched,” he said.
“To-date, the housing downturn has remained orderly, at least in the context of the significant upswing in values. This is supported by a below-average flow of new listings that is keeping overall inventory levels contained. There’s also tight labour market conditions, an accrual of borrower savings and a larger than normal cohort of fixed interest rate borrowers, who have so far been insulated from the rapid rise in interest rates.”
Units have been declining at a slower rate than housing, with prices surging in the unit market due to higher demand for more affordable residencies.
“The gap between median house and unit values increased to record levels through the COVID upswing. With borrowing capacity being hit hard as interest rates rise, it’s likely more housing demand has been diverted towards more affordable sectors of the market,” Lawless said.
Across October the decline was steep. 24,664 new listings over the 4 weeks ending 30 Oct was an incredible -25.2% below the same time last year and it was -18.6% below the 5 year average. House sales however were still above the 5 year average this October with Lawless suggesting this still indicates the high demand.
“The number of home sales is well down from the highs of late last year, however the fact that sales activity is still above the five-year average over the past three months reflects a base level of demand remains for housing,” Lawless said.
“Housing finance data shows subsequent buyers, such as upgraders, downsizers or movers, have been the most resilient sector of the market since interest rates started to rise. As interest rates rise further, it’s likely sales activity will also trend lower as borrowing capacity is reduced.”
With low supply and high demand continuing amidst the rental crisis, rent prices have continued to rise, as has capital city gross rental yields. It’s the highest level of capital city gross rental yields since November 2020 while rents rose another 0.6% in October. The uprise in rents is an attractive opportunity for potential investors, although it may direct would-be renters to re-consider buying a house instead. With home values continuing to drop, it will present a better entry point for first-home buyers.
