Home prices fell in a majority of Australia’s capital cities in January, hinting that the slowdown that started in Sydney is spreading across the country.
According to CoreLogic’s, prices fell in six of Australia’s eight capital cities, contributing to a 0.3% decline across the country in average weighted terms.
CoreLogic said house prices fell by 0.3% nationally, outpaced by a 0.5% drop for apartments.
The monthly decline, led by a 0.5% drop in capital city values, saw the annual increase in prices slow to just 3.2%. Regional prices grew by 0.2% over the month — the fourth consecutive month they’ve performed better than the capitals — leaving the increase on a year earlier at 3.3%.
That was marginally faster than the 3.2% gain recorded in Australia’s capitals.
As seen in the table below, the weakness was yet again led by Sydney where dwelling values slid by 0.9% over the month.
Coupled with previous declines, prices in Sydney have now fallen 3.1% since July last year.
Elsewhere, prices fell by 0.4% in Perth, 0.2% apiece in Melbourne, Adelaide and Darwin, along with 0.1% in Canberra over the month.
Prices in Brisbane were flat while those in Hobart, continuing the trend seen over the second half of 2017, jumped by an impressive 1%.
Over the quarter, prices nationally fell by 0.7%, thanks largely to a 2.5% decline in Sydney and moderation in Melbourne, Brisbane and Adelaide where prices rose by 0.1%.
“It was the first time since the three months to December 2006 that Sydney recorded the weakest value change of all capital cities,” said Tim Lawless, CoreLogic Head of Research.
Hobart, with an increase of 3.1%, was once again the strongest performing market.
Underlining the starkly divergent performance across the capitals over the past year, price changes in individual capitals ranged from a 6.4% decline in Darwin to a 12.4% increase in Hobart.
For Sydney and Melbourne, prices grew by 1.3% and 8% respectively over the same period. Still positive, but well below the levels seen in the first half of 2017.
Prices in the other capitals ranged from an increase of 4.5% in Canberra to a drop of 2.6% in Perth.
While on the surface the national result may appear alarming to some, Lawless said caution is warranted given January is typically a slow season for Australia’s housing market.
“Housing market activity is generally more sedate from late December through to late January, a factor which can contribute towards higher volatility in housing market measurements due to the lower number of observations,” he says.
While some analysts believe the decline in nominal prices reflects seasonal patterns rather than outright declines, Lawless that seasonality doesn’t typically exert much influence over the trend in hedonic valuations.
“While January may deliver additional noise in the indices results, the negative monthly result lines up with recent months, which showed a softening trend, particularly in Sydney and, to a lesser extent, Melbourne,” he says.
“In the absence of a catalyst to reinvigorate the market, such as lower mortgage rates or a loosening in credit policies, we expect to see a continuation of softening conditions across these markets.”
But, in Lawless’ opinion, the softening in house prices won’t be anything more sinister than that.
“While dwelling values are now easing, both at a macro level and across several of the capital cities, it is clear that Australian housing values aren’t falling off a cliff. National dwelling values are down just 0.7% over the past four months after increasing by 41% during the growth phase,” he says.
“CoreLogic cities strong jobs growth, low unemployment, high migration levels and low mortgage rates as key factors to support a continuation in the housing market’s soft landing.”
This table from CoreLogic provides more granular detail on price movements over the past month, quarter and year, looking at individual markets and by type of dwelling.