- Australian home prices continued to fall in March, albeit at a far slower pace than the levels seen in prior months.
- March is typically the strongest seasonal month for Australian home prices, according to CoreLogic.
- While prices are now falling at a slower pace, the downturn appears to be spreading further.
Australian home prices continued to fall in March, albeit at a far slower pace than the levels seen in prior months.
According to CoreLogic’s Home Value Index, prices nationwide fell by 0.6% in average weighted terms, slower than the 0.7% pace reported in February.
As has been the case for over a year, the national downturn was lead by capital city prices which fell by 0.7% last month. However, this was slower than the 0.9% decline seen in February and 1% plus falls seen around the turn of the new year.
“Although the CoreLogic national hedonic index series trended lower in March, the actual rate of decline has been easing over the past three months,” said Tim Lawless, Head of Research at CoreLogic.
“The 0.6% drop in March was actually the smallest of the month-on-month declines since values fell by 0.5% in October last year.”
According to analysis from Morgan Stanley, March is typically the seasonally strongest month for Australian home prices during the year, an outcome that could reflect lower turnover levels after the Christmas and New Year break.
The steepest falls were once again seen in Sydney and Melbourne at 0.9% and 0.8% respectively. Median prices also fell in all other capital city markets except for Hobart and Canberra.
Regional prices fell by a smaller 0.4% in weighted terms.
“While the pace of falls has slowed in March, the scope of the downturn has become more geographically widespread,” Lawless said.
This expanded table from CoreLogic shows how prices in individual capital city markets and broader regional areas have fared over the past month, quarter and year by property type.
According to the CoreLogic series, national dwelling prices have now fallen for 17 consecutive months, extending the downturn since October 2017 to 7.4%.
However, the national decline has not been uniform in nature, as seen in the chart below that shows the change in median property values across individual markets over the past five years, 12 months and since prices peaked in each location.
Looking ahead, Lawless notes that while there’s now some tentative evidence to suggest that the downturn in prices is “losing steam”, he said the outlook for prices will continue to impacted by uncertainty related to the federal election outcome, lending standards along with broader economic conditions.
“Federal elections generally cause some uncertainty, which is amplified by more so on this occasion considering the potential for a change of government which will also involve significant changes to taxation policies related to investment,” he said.
“No doubt some prospective buyers and sellers are delaying their housing decisions until after the election, however there is no guarantee that certainty will improve post-election considering the impact of a wind-back to negative gearing and halving of the capital gains tax concession is largely unknown.
“It seems a reasonable assumption that removing an incentive from the market wold result in some downward pressure on activity and prices for a period of time.”
Last week, the Australian Labor Party — currently front-runners to win the election based on recent polling — announced that these proposed changes would be introduced at the start of next year.
While uncertainty towards the election result, along with the impact of tighter lending standards that have been strengthened in recent years, may present headwinds for prices in the short to medium-term, Lawless said the potential for rate cuts from the Reserve Bank of Australia (RBA) could provide some offset through lower mortgage rates.
“A lower cost of debt will provide some stimulus for the housing market,” he said.
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