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Core Logic weekly wrap – remember the good times with the bad

During the up cycle of any property market, it’s natural that people will tend only to focus on when values rise. However, it’s important to remember the times values have fallen dramatically but recovered, bearing in mind it’s more common for combined capital city dwelling values to increase rather than fall.

“Although value rises have been more common, it doesn’t mean that the housing market is bulletproof and in some instances values have fallen quite dramatically and rapidly,” Mr Kusher said. Typically, he said, “the RBA or the government will step in and adjust fiscal policy to support the housing market and arrest the value falls.”

CoreLogic research shows that across the combined capital cities, dwelling values increased by 346.4% over the 20 years to April 2017.

The majority of capital cities recorded a decline in dwelling values in both 2008 and from late 2010/early 2011. The 2008 decline occurred as the financial crisis hit, however aggressive interest rate cuts and boots to first home buyers grants proved enough to spur demand and turn around the falling values.

In 2010 dwelling values fell as the post-financial crisis stimulus was being wound out of the market with interest rates increasing and first home buyer incentives being removed. These value falls were arrested as the RBA reversed direction and started to cut official interest rates again in late 2011.

Mr Kusher said the magnitude of the falls was fairly minor, considering other advanced economies fell into a recession after the 2008 financial crisis hit.

Mr Kusher said, “This analysis serves as a reminder that although capital city dwelling values have largely increased over the past 20 years, they are not immune from potential declines.”

While Mr Kusher said that while Australia is not seeing any of the shocking economic conditions of the size of the 2008 financial crisis, unemployment rates are as high as that period and levels of underemployment are historically high.

CoreLogic also reported that the market is slowly seeing historic low mortgage rates move higher against a backdrop of record-low wages growth and record-high household debt. Mr Kusher said, “Depending on how much mortgage rates are increased (noting that this is not happening due to the RBA) homeowners should be aware that it could lead to a slowing or even some potential falls in dwelling values.”

The weekly wrap from CoreLogic

  • Mosman in Sydney is the busiest individual suburb for auctions, with 14 auctions so far this week. Following Mosman is Craigieburn in Melbourne, Dee Why in Sydney and Melbourne suburbs Noble Park and St Albans.
  • Melbourne and Sydney have recorded their lowest clearance rates for the year
  • National auction clearance rates fell to 69.8 percent down from 71.3 per cent the week before. Although the clearance rate has fallen, it is slightly higher than the same time last year when 68.2 per cent of auctions were successful.
  • Adelaide and Tasmania recorded a week-on-week rise in auction clearance rates
  • Clearance rates in Brisbane, Canberra and Perth fell when compared to last week
  • Of the non-capital markets, Gold Coast had the lowest clearance rate with just 33 per cent of auctions recording a successful result

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Azal Khan

Azal Khan was a in-house features writer for Elite Agent Magazine.