National house prices have suffered their first annual decline since 2012 as the Sydney and Melbourne markets continue to soften, new figures show.
National dwelling values are down -0.4 per cent annually after slipping -0.1 per cent in May, according to CoreLogic’s May home value index.
The results show the average value of dwellings across the entire country falling for the first time since October 2012.
In a sign the housing market downturn is becoming more entrenched, May marked the eighth consecutive month-on-month fall since the national market peaked, CoreLogic reported.
Darwin, Sydney and Perth led the backslide in prices, recording annual falls of 7.9 per cent, 4.2 per cent and 1.8 per cent respectively.
By contrast, Hobart’s housing market continues to streak ahead of the capital cities, with dwelling values jumping 0.8 per cent this month, and up 12.7 per cent annually.
The Tasmanian capital is in the grips of a housing supply and affordability crisis, with the latest Rental Affordability Index showing that Hobart had leapfrogged Sydney to become Australia’s least affordable city for renters.
The drop in national dwelling values was largely led by softening house prices in the two biggest cities.
“The negative headline growth rate is a symptom of weakening housing conditions across the capital cities, led by Melbourne and Sydney where previously, capital gains were nation-leading,” CoreLogic head of research Tim Lawless said.
“Sydney and Melbourne comprise approximately 60 per cent of Australia’s housing market by value, and 40 per cent by number, so the performance of these two cities has a larger effect on the headline market performance.”
Affordable homes remain hot property
The most expensive end of the housing market is largely behind the softening Sydney and Melbourne housing markets, with affordable areas still fiercely competitive.
Nationally, the most affordable quarter of the market saw values rise by 1 per cent, and the “broad middle” of the market recorded a 2.3 per cent rise in dwelling values over the year, CoreLogic reported.
In Sydney, the most expensive quarter of the market has seen dwelling values fall by 7.1 per cent since prices peaked last year, compared with a 1.4 per cent fall across the least expensive quarter of the market and a 3.3 per cent decline across the broad ‘middle’ of the market, CoreLogic reported.
In Melbourne, the most affordable quarter of properties remained at record high values, while the most exclusive quarter of the market is down 3.3 per cent.
“In both the Sydney and Melbourne markets it was the premium end of the market that was most buoyant during the growth phase. Those properties are arguably the most overvalued, and generally deliver the lowest yield,” Mr Lawless said.
First home buyers fuel demand
First home buyers have been fuelling the demand for affordable housing following the introduction of stamp duty concessions in Victoria and New South Wales last July.
However, there are already signs that the benefits of the concessions are starting to wear off.
“From a negative perspective, the demand centred around the lower price points is pushing prices higher,” Mr Lawless said.
“It defeats the whole purpose of incentivising homebuyers to get to the market if they’re are simply paying more for their properties than six months ago.”
A ‘carefully managed slowdown’
“While previously, housing cycles have generally been influenced by changes in interest rates or economic conditions, the current easing in growth conditions is very much a factor of tighter credit policy,” he said.
The new results show that Australia’s housing market has turned on its head, with markets are now following a new trend where regional markets are outperforming the capitals, affordable housing options are showing stronger conditions than expensive properties and the previously top performing regions are now the amongst the weakest, Mr Lawless said.