Australia’s housing market downturn building momentum

Adelaide is the only capital city still recording monthly property price growth higher than 1 per cent, with market experts tipping the rate of housing value decline will gain pace and spread further in coming months.

The CoreLogic national Home Value Index recorded a second consecutive month of value drops in June, falling 0.6 per cent, to be 0.2 per cent down for the quarter.

Adelaide recorded 1.3 per cent growth for the month of June, but its three-month housing value growth rate has fallen from a peak of 7.4 per cent to 5.1 per cent in the June quarter.

Overall, dwelling value falls in Sydney and Melbourne were the key drivers of the June downturn, with Sydney dwelling values falling 1.6 per cent for the month and 2.8 per cent for the quarter.

In Melbourne, housing values dropped 1.1 per cent in June and 1.8 per cent for the quarter.

Housing values were also down in Hobart and regional Victoria for the month, and while Darwin, Perth and Canberra all recorded slight growth, it wasn’t enough to stop the national figures declining.

CoreLogic Research Director Tim Lawless said the housing market’s sharper reduction in growth coincided with the May cash rate hike, surging inflation and low consumer sentiment.

“Housing value growth has been easing since moving through a peak in March last year, when early drivers of the slowdown included rising fixed-term mortgage rates, an expiry of fiscal support, a trend towards lower consumer sentiment, affordability challenges and tighter credit conditions,” he said.

“More recently, surging inflation and a rapidly rising cash rate have added further momentum to the downwards trend.

“Since the initial cash rate hike on May 5, most housing markets around the country have seen a sharper reduction in the rate of growth.

“Considering inflation is likely to remain stubbornly high for some time, and interest rates are expected to rise substantially in response, it’s likely the rate of decline in housing values will continue to gather steam and become more widespread.”

The combined regional index just managed to remain in positive territory with 0.1 per cent dwelling value growth. 

But regional quarterly value growth has plummeted from a peak of 6.6 per cent in April 2021 to just 2 per cent in the three months to June 2022.

Unit markets have held their value slightly higher than houses in the largest capitals, however there is still a downward trend.

Sydney house values dropped 3 per cent in the June quarter compared to a 2.1 per cent decline for units.

Melbourne also showed a smaller quarterly decline in units relative to houses with a 0.5 per cent fall and 2.4 per cent drop respectively.

“The stronger performance across the unit sector comes after house values consistently outperformed units through the upswing,” Mr Lawless said.

“Since the onset of the pandemic in March 2020, capital city unit values have risen 9.8 per cent compared to 24.7 per cent for houses, resulting in better affordability across the medium to high density sector.”

The index also showed the market was swinging back in favour of buyers, with total advertised supply now 7 to 8 per cent above the levels recorded a year ago and well above the five-year average.

In Hobart, advertised stock levels have jumped 48.4 per cent compared to last year, while inventory is 20.7 per cent higher in Canberra.

Mr Lawless said the rise in advertised supply across some markets is mostly due to a slowdown in the rate of absorption. 

“Estimated transactions in Sydney throughout the June quarter were 36.7 per cent lower than a year ago while Melbourne is down 18.3 per cent,” he said.

“At the same time, the flow of new listings added to the market is falling as selling conditions becoming more challenging and listings move into a seasonal lull. 

“We aren’t seeing any signs of panicked selling as housing conditions cool, in fact the trend is the opposite, with the flow of new listings to the market slowing.” 

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Kylie Dulhunty

Kylie Dulhunty is the Deputy Editor at Elite Agent.