An update to the national housing market

An update to the national housing market

The second half of May and early June saw a variety of outcomes and announcements that are likely to bode well for the housing market.

These include; stability in the federal government, an announcement from APRA that borrower serviceability assessments were likely to improve by late June and the RBA cut interest rates to a new record low on June 3rd.

CoreLogic has released their newest housing market update for June 2019.

Any good news though wasn’t enough to stave off a further decline in dwelling values in May, however market sentiment does seem to have improved over the second half of the month. Although dwelling values fell in May, the pace of decline continued to ease; a trend that has been evident since the beginning of 2019.

Nationally, dwelling values were down 0.4% in May, which was the smallest month-on-month decline since May 2018.

This improvement is primarily being driven by a slower rate of decline in Sydney and Melbourne where housing values were previously falling at the fastest rate of any capital city.

Sydney values were 0.5% lower over the month while Melbourne values were 0.3% lower; the smallest decline in values across both cities since March last year.

In other cities, where housing market conditions have generally been more resilient to a downturn, the trend is the opposite.

Hobart values have tracked lower for two months running, taking the rolling quarterly rate of change into negative territory for the first time since early 2016, and with Canberra values 0.2% lower over the month, the quarterly rate of growth remains only slightly in positive territory at +0.2%.

While the pace of value falls eased across some cities, the Australian housing market remains in a geographically broad-based downturn.

Adelaide was the only city to avoid a slip in housing values over the month and in ‘rest-of-state’ areas, South Australia, Tasmania and the Northern Territory were the only regions where values rose in May.

In fact, Regional Tasmania is the only broad region across the country where housing values remain at record highs.

The slower rate of decline is also showing in the higher auction clearance rate through the month.

The last week of May saw Sydney clearance rates break the 60% mark for the first time in a year, while Melbourne clearance rates have held around 60% over three of the past six weeks.

Although clearance rates remain low relative to several years ago when housing market conditions were much stronger, the improved performance at auction aligns with the easing rate of decline.

Since peaking in October 2017, national dwelling values have reduced by 8.2%, with values across the combined capitals index down 10.1% while regional values have been more resilient, falling by 3.0% since peaking.

Larger capital city falls have been recorded in Darwin, which is down nearly 30%, and Perth which is down by around 19%, as well as regional WA where the mining downturn has led to persistently weak economic and demographic conditions that have weighed heavily on home values.

These regions now represent some of the most affordable housing markets around the country; a factor which explains the high proportion of first home buyer participation in these markets.

The last time values were this low in Darwin was March 2007, in Perth values were previously this low in April 2006 and values haven’t been this low across regional WA since July 2005.