The scope of Australia’s housing downturn has widened, with both capital cities and regional areas recording a drop in housing values through October.
Yet the momentum of the downturn is slowing in some parts and values remain well above pre-Covid levels, new data shows.
CoreLogic’s latest national Home Value Index (HVI) moved through a sixth month of consistent declines, with values falling a further 1.2% in October.
Across the capital cities the monthly decline ranged from a 2.0% fall in Brisbane to Perth where dwelling values nudged 0.2% lower. Across the rest-of-state regions, monthly falls of more than 1% were recorded in NSW, Victoria and Queensland.
Although more regions are recording lower values, the rates remain diverse. The pace of falls has eased over the past two months across Sydney and past three months in Melbourne but has gathered momentum in Brisbane where values are now falling the most rapidly of any capital city or rest-of-state region.
The changing dynamic across the largest cities has seen the rate of decline across the combined capitals index ease from a 1.6% drop in August to 1.4% in September and 1.1% in October.
CoreLogic’s Research Director, Tim Lawless said that 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”, Lawless suggested.
“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.”
Housing values across most of the broad regions remain well above pre-COVID levels, implying most home owners remain in a positive valuation position relative to their purchase price.
At the combined capital city level, housing values have fallen 6.5% following a 25.5% rise through the upswing. Sydney home values are down 10.2% since peaking in January (after a 27.7% rise) and Melbourne values down 6.4% since February (after rising 17.3%).
House values have continued to fall at a faster rate than unit values. Capital city house values were down 1.2% in October compared with a 0.7% decline in unit values. This underperformance across the lower density sector has been a feature of the downturn, partially offsetting the substantially larger rise in house values through the growth phase.
Through the upswing, capital city house values increased by 29.9% which was more than double the rise in unit values at 13.2%. Since peaking in April, capital city house values have reduced by 7.2% while unit values are down 4.2%.
Lawless thinks the smaller decline in values across the unit sector could be attributed to the more affordable price points across the medium to high density sector.
“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,” he said.
On the demand side, the estimated number of home sales has held reasonably firm through the first two months of spring. Based on modelled sales over the three months ending October, capital city home sales were 16.6% lower than a year ago but 3.8% above the previous five-year average for this time of the year.
“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”, he concluded.
