- Australian home prices fell heavily again in January, according to CoreLogic’s Home Value Index.
- After falling by the most since 1983 in December, capital city prices skidded by a further 1.2%, led by a 1.6% drop in Melbourne.
- Prices fell in all capitals except for Canberra. They also fell in regional areas, on average.
- The top end of the market continues to lead national declines, largely reflecting falls in Sydney and Melbourne.
- CoreLogic says the January results point to “a challenging year for the housing market”.
The temperature outside may be hot but Australia’s housing markets remain ice cold.
After logging the largest decline since 1983 in December, capital city home prices fell heavily again in January. This time the weakness was not just driven by falls in Sydney and Melbourne — the declines were almost everywhere.
CoreLogic’s Home Value Index skidded another 1% during the month in average weighted terms, extending the national downturn that began in late 2017 to 6.1%.
Australia’s median home price now sits levels last seen in October 2016 with prices declining in 13 of the past 15 months.
As shown in the table below from CoreLogic, while the national decline was once again led by Sydney and Melbourne, unlike what’s been seen recently, the losses last month were spread across the nation, falling in all capital cities except for Canberra and in regional centres.
Price declines ranged from 1.6% in Melbourne to 0.2% in Hobart, leaving the falls across the combined capitals at 1.2%. That decline followed a 1.3% drop in December, so there’s little sign the downturn is slowing in early 2019.
House prices across the capitals fell by 1.2% from December, led by falls of 1.7%, 1.4% and 1.1% respectively in Melbourne, Sydney and Perth. For apartments, capital city prices eased by a slightly smaller 1.1%, again driven by declines of over 1% in Melbourne, Sydney and Perth, along with a chunky 3.1% drop in Darwin.
In regional areas, house and apartment prices both fell by 0.2%.
“While most of the attention is on Australia’s two largest cities, Sydney and Melbourne, weaker housing market conditions are evident across most of the capital cities,” said Tim Lawless, Head of Research at CoreLogic.
“Every capital, apart from Canberra, recorded a month-on-month fall in dwelling values and only two capital cities — Hobart and Canberra — recorded a rise in values over the past three months.”
That suggests smaller housing markets are now also starting to cool, following the lead from the major cities.
In the past three months, median prices in Sydney and Melbourne fell 4.5% and 4% respectively, the fastest pace at any point in the current downturn. Combined with more modest declines in Brisbane, Adelaide, Perth and Darwin, that left Australia’s median capital city home price down 3.3% over the past three months, extending the decline over the past year to 6.9%.
The latter figure largely reflects falls of 9.7% and 8.3% respectively in Sydney and Melbourne since January last year. Sydney prices are now back to where they were in July 2016, while those in Melbourne sit at levels last seen in in January 2017.
Sydney and Melbourne contain around 40% of Australia’s total housing stock, and account for around 55% of the nations total housing wealth. That makes movements in those cities highly influential on the national figure.
In regional centres, median prices fell by a more modest 0.6% over the past three months, and by 0.8% over the past year.
As has been the case for some time, Lawless said declines at the top end of Australia’s housing market continued to outpace those at more affordable valuations. Being the most expensive housing markets in Australia, that largely means Sydney and Melbourne.
“Weakness across the most expensive quarter of the market is most visible in Melbourne where values have fallen 12.4% over the past 12 months and 13.8% since peaking,” he said.
“Sydney’s top quartile is showing a similar trend with values down 10.8% over the past year and 14.6% since they peaked.”
Over the past year, capital home values in the top quartile of valuations have fallen 9.9%, faster than the broader capital city average over the same period.
Median prices at lower quarter of valuations have generally fared better across the smaller capitals, although they have still declined in Sydney and Melbourne over the past year.
“The lower valuation brackets have benefited from higher demand from first-home buyers as well as tighter lending conditions for borrowers… which is likely supporting a shift in demand towards lower price points,” Lawless said.
With lending restrictions unlikely to be watered down any time soon, and with consumer sentiment softening and still-elevated levels of properties on the market, Lawless says the January result and the information from other housing-related data points to “a challenging year for the housing market”.
“There may be a further dent to confidence as we approach the federal election and housing finance conditions are likely to remain tight after the Hayne Royal Commission final report is released on Monday,” he said.
Given that backdrop, there’s no shortage of forecasters who think Australian home prices will continue to fall well into next year. Some even think the downturn in Sydney and Melbourne isn’t even halfway through.
With housing the largest store of wealth for a majority of Australian households, there’s also growing concern that falling prices could lead to a slowdown in household spending, potentially weighing on economic and employment growth.
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