- Australian home prices were steady in March after several months of falls.
- Strength in regional areas and units offset continued weakness in capital city house prices.
- CoreLogic says the rate of decline is slowing, but does not expect a strong price recovery soon.
Australian home prices were unchanged in March, according to CoreLogic’s latest hedonic home value index, snapping a run of monthly declines that began in late 2017.
CoreLogic said strength in regional areas managed to offset a patchy performance across the nation’s capitals during the month.
“The stronger combined regional markets performance continues a trend that began to emerge in October last year where regional housing markets showed an overall improvement in the pace of capital gains while the combined capitals trend softened,” said Tim Lawless, CoreLogic’s head of research.
According to CoreLogic, prices in regional areas rose by 0.4% last month in average weighted terms, a performance in stark contrast to that seen across the nation’s capitals where prices fell by 0.2%.
By type of dwelling, CoreLogic said the weakness across the combined capitals largely reflected a 0.2% decline in detached house prices, overriding a flat result for units.
As seen in the table below from CoreLogic, prices fell by 0.3% apiece in Sydney and Adelaide and by 0.2% in Melbourne during the month, masking a stronger performance from the remaining capitals over the same period.
Over the quarter, prices fell in six of Australia’s eight capital cities, ranging from a 1.8% drop in Sydney to a 0.1% fall in Darwin.
Hobart continued to buck the trend with prices lifting by 3.4%. Brisbane was also a relative outperformer with prices holding steady over the same period.
In average weighted terms, house values fell 1% nationally over the March quarter, outpacing a 0.7% decline in unit prices.
Lawless said the broad-based falls highlight that the softening trend in Australia’s broader housing market is largely due to weaker conditions in Sydney and Melbourne, especially for detached dwelling prices.
“The unit sector across Sydney and Melbourne has shown stronger conditions relative to detached housing,” Lawless said, adding that this trend has been evident since the middle of last year.
“Sydney unit values are up 1.9% over the past twelve months, while house values are down 3.8%. Similarly in Melbourne, unit values are 6.6% higher over the past twelve months while house values are up just 4.9%.”
Lawless says this reflects affordability constraints for detached dwellings in both of these cities, along with a preference from some buyers to live closer to the city and recent stamp duty concessions introduced by the New South Wales and Victorian state governments to help improve affordability for first time buyers.
“The stronger performance from the unit sector may suggest that buyer demand is becoming more concentrated in the medium to high density sector where entry prices are lower and commuting times are often more convenient when compared with the detached housing markets around the outer fringes of the city,” he says.
“The surge in first home buyer activity since stamp duty concessions became available in July last year may also be supporting demand across the medium and high density sector where prices are often better aligned with first time buyer budgets.”
In contrast to the recent trends seen in Sydney and Melbourne, CoreLogic said prices for houses outperformed units in all of Australia’s smaller capitals over the past 12 months.
This expanded table from CoreLogic shows the performance of house and unit prices by individual capital city over the past month, quarter and year.
While pockets of weakness still exist in individual markets, especially in Sydney and to a lesser degree Melbourne, Lawless says recent trends suggest the worst of Australia’s housing market downturn may now be over.
“The rate of decline is now easing,” he says.
“This is particularly evident in Sydney where month-to-month falls have generally been more substantial than other capital cities.
“In December and January, Sydney dwelling values were falling at a monthly rate of 0.9%, reducing to 0.6% in February and now 0.3% in March.
“If the trend towards an improving rate of decline persists, the Sydney housing market may have already moved through its peak rate of decline, after dwelling values have fallen by 3.9% since their end of month peak in July last year.”
However, while that suggests the Sydney-led national slowdown is easing, Lawless isn’t expecting a sharp acceleration in price growth as seen in prior housing market slowdowns.
“Despite the potential improvement in credit availability for investors, rental yields remain low and credit policy is likely to be firmly under the spotlight following the banking Royal Commission,” he says.
“Considering these factors, even if the housing market is close to finding a floor, the prospects for a rebound in capital gains, as seen through late 2016 and early 2017, are far less likely.”