Finance Property Housing downturn: Largest annual fall in home values since 2012

Housing downturn: Largest annual fall in home values since 2012

Photo of Melbourne's skyline.
Melbourne's housing market is now softening at a faster rate than Sydney's, new data shows. Photo: Getty
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The housing downturn has picked up speed, with property prices across the country recording their largest combined annual fall in six years.

Property data company CoreLogic said home values fell 0.6 per cent nationwide in July – and are down 1.6 per cent in 12 months. That is the largest annual fall since August 2012.

The downturn appears widespread, affecting both cities and regional areas. Values slipped in five of the eight capital cities in the past three months, while regional housing markets – “where conditions have generally been more resilient to falls” – also “turned negative”, CoreLogic said.

The slowdown is being fuelled by long-running declines in Perth and Darwin, where prices have fallen 2.3 per cent and 6.2 per cent respectively in 12 months.

But accelerating declines in Sydney and Melbourne, and slowing growth in most of the remaining regions, also contributed, CoreLogic research head Tim Lawless said.

Source: CoreLogic

Capital cities: Melbourne overtakes Sydney

The decline is hitting hardest in Melbourne, which has overtaken Sydney to lead the capital-city downturn.

Dwelling values in the Victorian capital fell 1.8 per cent in the quarter. Next was Perth, where values slipped 1.5 per cent, and then Sydney, down 1.1 per cent.

Melbourne’s housing market peaked in November last year, five months later than Sydney’s.

Since then, Melbourne home values have fallen 2.9 per cent, while prices in Sydney are down 5.4 per cent.

“We can’t see any factors that may halt or reverse the housing markets trajectory of subtle declines over the second half of 2018,” Mr Lawless said.

“The availability of housing credit has been a significant factor contributing to this slowdown. However, there are a variety of hurdles contributing to slower conditions.”

Annual change in dwelling values graph. Source: CoreLogic.
Source: CoreLogic

There was moderate annual price growth in other capital cities.

Brisbane and Adelaide houses did not skyrocket in value in the past five years to the extent those in Melbourne and Sydney did. Brisbane prices are up 1.2 per cent in 12 months, Adelaide’s up 0.7 per cent.

In Canberra, home values are up 2.4 per cent in 12 months – and rose 0.2 per cent in July.

The nation’s hottest housing market remains Hobart, where prices have surged a staggering 11.5 per cent in the past 12 months.

Housing affordability remains an issue

Despite softening values in Sydney and Melbourne, housing affordability “remains a pressing issue” in Australia’s biggest cities, CoreLogic said.

Prices would need to fall a lot further before affordability returned to a more adequate level, Mr Lawless said.

“While dampening factors are at play, consistently low mortgage rates will continue to provide a support buffer, which should help to keep a floor under housing demand,” he said.

“Owner-occupiers continue to enjoy mortgage rates at the lowest level since the 1960s, and, although investors are paying around a 60-basis point premium on their home loans, interest rates remain low for this segment of the market as well.”

CoreLogic predicted a looming moderate rise in interest rates.

“Higher funding costs could see mortgage rates edge higher. However, we would need to see mortgage rates rise by more than 150 basis points before returning to the 20-year average of 6.8 per cent,” Mr Lawless said.

Recent government restrictions on lending are also likely to mean owner-occupiers begin to outpace investors in the housing market.

“Considering the 30 per cent limit on interest-only loan originations and the stiff interest rate premiums for interest-only loans, it’s likely we will see owner-occupiers gradually consume a greater share of market activity relative to investors,” Mr Lawless said.