- Australian home prices fell for a seventh consecutive month in April in average weighted terms.
- Prices fell in Australia’s largest cities — Sydney, Melbourne and Brisbane — masking flat to higher price growth in other parts of the country.
- Annual price growth across the country went negative for the first time since November 2012.
Australian home prices continue to slide.
And for the first time since November 2012, capital city prices have fallen on an annualised basis.
According to CoreLogic’s home value index, prices across the country fell by 0.1% in April in average weighted terms, extending the streak of losses into a seventh consecutive month.
As has been the case in recent months, the weakness was concentrated in the capital cities, especially in Sydney and Melbourne, Australia’s largest and most expensive property markets.
Prices across the capital fell by 0.3% in average weighted terms, dragged lower by declines of 0.4% apiece in Sydney and Melbourne.
Tim Lawless, head of research at CoreLogic, put the ongoing weakness in these cities down to tighter lending restrictions for housing investors.
“Weaker housing market conditions are primarily a factor of tighter credit policies which have dampened investment activity,” he says.
“Considering investment activity has been substantially concentrated in Sydney and Melbourne, it makes sense that these two markets would feel the brunt of tighter credit conditions for investment lending.”
However, while prices fell in Australia’s largest markets, as seen in the table below from CoreLogic, prices were flat to higher in all other Australian capital cities in April, and in regional areas.
“At a macro level, the latest trends are virtually the opposite of what we have become used to over the past five or so years,” Lawless said.
“Across the most expensive quarter of the market, dwelling values have increased at almost twice the pace of the most affordable quarter over the past five years, up 8.2% per annum compared with 4.4% per annum.
“As conditions have slowed down, it’s been the most affordable end of the housing market where values have remained resilient to falls, trending 1.9% higher over the past twelve months while the most expensive quarter of properties has seen values fall by 1.6%.”
Not only was that reflected in the price movements seen in Australia’s smaller, more affordable, capital city markets, but also in the split between unit and housing values during the month.
Unit prices rose by 0.1% in capital city markets, a stronger performance than for houses which slid by 0.4%.
Mirroring the trends seen across the capitals in April, prices in regional areas continued to outperform the national average.
Regional house prices rose by 0.5%, outpacing a smaller 0.3% lift in unit values. Combined, regional prices rose by 0.4%
“Regional areas are now outperforming the capitals and units are outperforming houses,” said Lawless, again, demonstrating the reversal of trends seen in prior years.
This chart from CoreLogic shows the recent divergence between capital city and regional prices.
However, despite the mixed price performance in recent months, with values in Sydney and Melbourne continuing to fall, it saw annual price growth for the combined capital cities turn negative for the first time since November 2012.
“On an annual basis, the combined capitals recorded the first decline in dwelling values since late 2012, with values slipping 0.3% lower, driven by falls in Sydney, Perth and Darwin,” Lawless said.
“The only capital city to see an improvement in annual growth conditions relative to a year ago is Perth, where the rate of decline has slowed from 3.0% last year to 2.3% over the past twelve months.”
Even the high-flying Hobart market, where prices rose by 12.7% over the year, is now growing at a slower pace than a year ago.
In the capitals, house prices fell by 0.3% over the year, masking a 1.9% increase in unit values.
Including regional areas, where dwelling values increased by 2.4%, nationwide price growth over the year slowed to 0.2%.
Looking ahead, Lawless says that he doesn’t expect the housing slowdown to turn into anything more sinister, suggesting that low interest rates and strong levels of population growth should lead to a “soft landing”.
“Low mortgage rate are expected to keep a floor under housing demand,” he says.
“Another factor supporting a soft landing is high overseas migration, particularly into New South Wales and Victoria as well as strong interstate migration flows, especially into Queensland, Victoria and Tasmania.”
As for a risk to this view, Lawless says a reduction in Australia’s migration intake would result in reduced demand for housing, particularly in New South Wales and Victoria which see the strongest levels of overseas migrant arrivals.
This expanded table from CoreLogic has more granular data on price movements by property type and location.
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