- Australian home prices fell almost everywhere last month, according latest data from CoreLogic.
- However, while price falls are spreading, the overall pace of declines nationally has slowed noticeably in recent months.
- Along with an improvement in other housing market indicators in recent months, CoreLogic says the worst of the downturn may now be over.
- The group says the upcoming federal election will be a “wild card” for the market in the near-term, but that uncertainty may be offset by a potential rate cut from the RBA in the period ahead.
Australian home prices fell almost everywhere last month, according to the latest CoreLogic Home Value Index for April.
However, while the downturn, initially concentrated in Darwin and Perth and later joined by Sydney and Melbourne, is clearly spreading across the country, the overall pace of price declines has slowed quite sharply in recent months, adding to evidence in other housing market indicators that suggests the worst of the correction may now be over.
“We are seeing further evidence that the worst of the housing market conditions are now behind us,” said Tim Lawless, Head of Research at CoreLogic.
“Values are still broadly declining, however the pace of of decline has moderated since December last year and there are some tentative signs that credit flows have improved, albeit from a low base. “
According to CoreLogic, Australia’s median home price fell by 0.5% last month in average weighted terms, extending the downturn over the past quarter and year to 1.9% and 7.2% respectively.
Even with the recent moderation in price falls nationally, the annual decline was still the steepest since the GFC, leaving Australia’s median home price down 7.9% from the cyclical peak in September 2017.
Like the national decline, median values across the capitals slipped 0.5% from March in average weighted terms, leaving the decline over the past year at 8.4%.
As has been the case for well over a year, large falls were recorded in both Sydney and Melbourne in April. However, the rate of decline in Australia’s largest and most expensive housing markets has slowed quite noticeably from the levels seen around the turn of last year.
“The improvement in the rate of decline is attributable to an easing in the market downturn across Sydney and Melbourne where values were previously falling much faster,” Lawless said.
“In December last year, Sydney dwelling values were down 1.8%, with the pace of month-on-month falls progressively moderating back to 0.7% in April.
“Similarly, Melbourne values were down 1.5% in December, with the rate of decline improving to 0.6% in April.”
While the pace of price falls has moderated, whether that is due to seasonal effects created by low housing turnover in the period before Autumn, or an actual improvement in market conditions, is still unclear at this point.
According to analysis from Morgan Stanley earlier this year, Australian home prices tend to be seasonally the weakest in the middle and around the turn of the calendar year, with periods in between typically stronger.
Although a definitive answer as to whether Sydney and Melbourne prices are close to bottoming is not available at this point, it’s clear that while price declines in those capitals have eased, values elsewhere are now starting to fall.
CoreLogic said median prices fell in all Australian capital cities except for Canberra last month, led by a large 1.2% drop in Darwin. Hobart, previously the hottest capital city market in terms of price growth, also saw values fall by a hefty 0.9% from March.
Elsewhere, price falls ranged from 0.4% in Perth and Brisbane to a little at 0.1% in Adelaide. Canberra managed to buck the overall capital city trend with median values lifting by 0.4% during the month.
Median prices in regional areas also dipped by 0.3% in average weighted terms, leaving the decline over the past year at 2.6%.
The expanded table below from CoreLogic shows price movements for the capitals and regional areas, including by dwelling type, over the past month, quarter and year. Details on gross rental yields for each market are also available.
While Lawless says recent improvements in housing finance, auction clearance rates and the level of unsold housing stock, along with the moderation in price declines nationally, all provide tentative evidence that the worst of the downturn may be over, he cautioned that “any recovery in dwelling values is likely to be a long-term outlook.
In the near-term, Lawless said the prospect of a change of government at the Federal election, and with it changes around the tax treatment of housing, are a “wildcard” for the market.
Helping to offset that uncertainty, he said the prospect of a rate cut from the RBA, possibly as soon as next week, may help to underpin market conditions.
“While borrowers are facing tougher serviceability assessments and scrutiny around their overall debt levels relative to their income and expenses, lower mortgage rates will certainly be a net positive for the housing market,” he said.
“Mortgage rates are already around the lowest levels since the 1960s and any further reduction is likely to be well received by the market.”
Business Insider Emails & Alerts
Site highlights each day to your inbox.