- ▶ Best performing capital city: Hobart +3.3%
- ▶ Weakest performing capital city: Darwin -2.7%
- ▶ Highest rental yield: Darwin 5.8%
- ▶ Lowest rental yields: Melbourne 2.9%
According to CoreLogic head of research Tim Lawless, a significant contributor to the downwards movement over the month came from the Sydney housing market, which recorded a 0.7% fall in dwelling values, while a fall in values was also recorded across Darwin and regional Northern Territory which were both down 0.4% over the month. For the remaining broad regions of Australia, dwelling values were relatively steady, or experienced a subtle rise, over the month.
National dwelling values tracked 0.2% higher over the past three months and have increased 5.2% over the twelve months ending November. The national annual growth rate has now halved since reaching a recent peak in May 2017, when dwelling values rose 10.4%.
Conditions remain diverse across the regions
The Sydney housing market moved through a recent peak in July 2017 and dwelling values have been trending lower each month since that time. Dwelling values were down 0.7% in November to be 1.3% lower relative to the market peak.
The Perth housing market may finally have bottomed out. Dwelling values across Perth have edged higher over each of the past three months to record the first rolling quarterly capital gain since late 2014. Homes are selling faster (59 DOM V’s 68 DOM a year ago) and stock levels have reduced by 12.7% compared to last year.
In Melbourne, the rate of value growth has slowed with dwelling values recorded relatively steady growth over the past few months with values increasing by 1.9% over the past three months. Mr Lawless noted that the performance may be driven by healthier affordability, Lower investment activity and a higher level of net migration.
In Brisbane and Adelaide, the slow and steady growth story continues. Brisbane dwelling values were up 0.1% over the month and Adelaide dwelling values were unchanged. Over the past 12 months, both recorded gains of 2.4% and 3.4% respectively.
Darwin continued to see dwelling values fall over the month (-0.4%), quarter (-2.7%) and year (-5.5%). Since values peaked all the way back in May 2014, they have fallen by 20.8% and Mr Lawless suggests that to-date, there is no sign of those falls levelling.
Canberra, on the other hand, has seen gains in the month, quarter and year rising 0.9%, 1.3% and 5.8% respectively.
Comparing the housing values with those of units, the housing values continue to generally outperform in terms of value growth. Mr Lawless said, “Overall, lower growth relative to houses across the unit sector reflects a general preference for lower density housing, particularly from owner-occupiers, as well as the fact that demand for new units is now being impacted by tighter credit conditions for investors and high supply levels for new high-rise unit construction over recent years.”
What do the rental conditions look like
Rental rates across the nation increased by 0.1% in November 2017 to be 0.3% higher over the past three months and 2.8% higher over the past year. Sending a signal that gross yields may have bottomed out albeit that the rate of rental growth has been slightly stronger than the rate of dwelling value growth over the past quarter. On an annual basis however, rental growth remains much slower than value growth. Despite the subtle rise, gross rental yields nationally remain at low levels, recorded at 3.46% for houses and 4.09% for units.
Gross rental yields have drifted to new record lows in Melbourne and Canberra but have started to lift in Sydney. Across each capital city except for Darwin, gross rental yields now sit at a lower level than they were 12 months ago.
Looking at the markets outside of the capital cities, regional areas of New South Wales continue to see the strongest growth. Value changes in the broad regional New South Wales market outperformed those in Sydney. The best performing region outside of a capital city over the past year has been Newcastle and Lake Macquarie, directly north of Sydney, where values have increased by 13.0% over the past year.
The Southern Highlands and Shoalhaven region to the south-west of Sydney has been the second strongest performing regional market (12.4%) while Geelong to the south-west of Melbourne has seen the third highest rate of growth over the year across regional Australia at 11.1%.
In the remaining states; Sunshine Coast has seen the strongest growth in regional Queensland (5.7%), while South East South Australia was the only regional market of the state to record a value increase, up 1.1%. Values have fallen across the year in regional Western Australia with Bunbury recording the most moderate fall (-0.1%). In Tasmania, Launceston and North East values have risen by 7.3% over the past year.
Following several months of softer results, Mr Lawless said it is now fairly clear that the housing market has peaked. Sydney, which accounts for around a third of the value of housing nationally, is driving the slowdown, however, growth has also moderated in most other capital cities.
Mr Lawless said, “A housing market in a ‘cooling off’ phase is not unexpected considering the tighter credit conditions, heightened regulatory environment, affordability constraints and subdued consumer confidence.”
Mr Lawless concludes that although housing market conditions may track positively across some of the smaller capital city and regional housing markets, the heavy weighting of both dwelling stock and the value of dwelling stock in Sydney and Melbourne is likely to keep the headline rates of capital gain low to negative as these two cities move through their down phase.