Values fall in June across the larger capital cities

Despite Australians beginning to take baby steps out in the world again, real estate values across the combined capitals have continued to drop for the second month in a row, falling 0.7 per cent in June, after a 0.4 per cent decline in May. But it’s not all bad news for owners – especially those in Hobart and Darwin.

The latest CoreLogic data shows that while the five largest capital cities all saw housing values decline throughout June, Hobart, Darwin and Canberra each recorded slight rises.

The largest decline was in Melbourne, with a 1.1 per cent drop in values. Given 10 postcodes across the city will now be in lockdown for some weeks, severely reduced market activity in Victoria throughout July looks likely.

Meanwhile, market activity continues on an upward trajectory following a COVID-19 constrained April. Estimates showed a 21.5 per cent surge in activity through May, rising a further 29.5 per cent in June.

CoreLogic head of research, Tim Lawless, is optimistic, referring to the downwards pressure on market values as “mild to date”.

“A variety of factors have helped to protect home values from more significant declines,” he explains, “including persistently low advertised stock levels and significant government stimulus.

Additionally, low interest rates and forbearance policies from lenders have helped to keep urgent sales off the market, providing further insulation to housing values.”

The recent falls in property values appear to be an anomaly, caused by the unforeseeable pandemic. A clearer long-term view is evident in the annual growth rates.

“The 12 month change in home values remains in positive double digit territory across Sydney (13.3 per cent) and Melbourne (10.2 per cent),” Mr Lawless notes.

“The only capitals where values show declines on an annual basis are Perth and Darwin, but even across these cities, home values were early into a recovery phase pre-COVID.”

Although government stimulus, relaxed lending policies, and dropping interest rates have staved off a more severe drop in real estate values, eventually it will come time to pay the piper.

“While it is encouraging to see lenders have recently hinted at an extension in their repayment leniency policies, the government stimulus will eventually taper and banks will require borrowers to repay their loans,” Lawless predicts.

“The longer-term outlook for the housing market is largely dependent on how well the economy is tracking when these support measures are removed.”

Now, for some good news

A number of pleasing trends throughout June suggest that things are beginning to look up.

Real estate agent activity is tracking higher than the same time last year, based on the amount of comparative market analysis reports generated by agents (a good indicator of imminent listings).

While new listings are down from last June, they are up 42 per cent from the recent low in May.

Auction markets continue to recover, too, with the combined clearance rate for capital cities averaging 59.9 per cent since mid-May; an impressive rise from the record low of 30.2 per cent in April, when the market took a beating as a result of on-site auctions being banned, and property walk-throughs severely restricted.

Finally, ANZ/Roy Morgan’s weekly consumer confidence surveys have recorded a 42 per cent lift since the end of March; a metric that is highly correlated with the property market.

As social distancing policies are relaxed further, and Australia faces a less harsh recession than previously forecast, things seem to be heading back to normal.

But… don’t be too hasty

“Despite the early signs of improved economic activity and a lift in housing turnover, the downside risk remains significant,” Mr Lawless warns.

“The recent rise of active virus cases in Victoria are a reminder that the potential risk of a second wave remains a stark reality.

“If we see the virus curve steepening rather than flattening, a return to restrictive policies is highly likely.

“Another key risk relates to the eventual removal of stimulus measures and borrower repayment holidays.

“Eventually the economy and borrowers will need to abide by market forces.

“This is when we could see a rise in mortgage arrears and the potential for a lift in urgent or forced sales.”

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Nathan Jolly

Nathan Jolly was an in-house journalist with Elite Agent. He worked with the company from July 2020 to December 2020.