Nationally housing prices have been falling since mid-2017 and are now 10% down from their peak.
But lately, people are starting to ask: “Are we there yet? How much further property prices likely to fall?”
This current market downturn, which looks like it will end up as the longest and most severe downturn in modern history, is being caused by the constrained ability to access finance, poor consumer confidence and the oversupply of too many of the wrong properties, rather than the typical cause of a market downturn such as economic recession or high interest rates.
However, some green shoots are appearing… so let’s look at the latest graphs and statistics from CoreLogic to get a better idea of what’s happening around our
property markets in Australia
CoreLogic report that:
Nationally dwelling values fell for the 18th consecutive month in April 2019, recording a -0.5% decline Over the month, combined capital city values fell by -0.5% which was the smallest decline since October 2018. The combined regional markets recorded a -0.3% fall. Over the past year, national dwelling values have fallen by -7.2% which is their largest annual fall since February 2009. Combined capital city dwelling values were -8.4% lower over the year and combined regional market values were -2.6% lower. The number of property transactions is down 14.4% nationally year on year, Adelaide and Darwin were the only cities in which sales volumes rose over the year.
Monthly price declines are now moderating, suggesting that we are probably past the worst and prices should begin to stabilise by late 2019.
However, it looks like this will be the longest and deepest property downturn in modern history, despite the fact that the underlying economic fundamentals are sound.
The Sydney property market peaked in mid-2017 after dwelling values surged almost 80% since the beginning of the last cycle in 2012.
Sydney real estate values have been falling consistently since then, with dwelling values falling by 2.5 % over the past three months, but the rate of decline is easing (0.7% over the month of April – the smallest decline in 6 months).
The Sydney market is now down 13.9% since values peaked in July 2017.
This time round there has been a larger decline in the
value of houses in Sydney than for Sydney apartments and more expensive properties are experiencing a bigger downturn than cheaper properties.
This is due to affordability factors as well as a surge in first home buyer activity which is supporting demand across the more affordable end of the market.
First home buyers are active in Sydney creating stronger markets over the lower quarter of the market – especially apartments.
With dwelling values having fallen by – 10.9% over the year to April 2019, only two regions, both of which are located in the Blue Mountains (Blue Mountains North and Wentworth Falls), have recorded annual growth.
Sydney homes now an average of 62 days to sell, compared to 33 days a year ago, however, vendors are
discounting their properties by an average of 6.9% compared to 4.9% a year ago to affect a sale.
The fact that Days on Market and Vendor Discounting is
dropping and auction clearance rates are rising are all positive signs for Sydney property market. Melbourne
property market peaked in November 2017 and CoreLogic report a 10% fall in values over the last year, but values only fell 0.6% over the last month (the smallest decline since June last year.)
Over the last year, there were 25% fewer sales than the previous year, a sign that sellers are not putting their properties on the market unless they really need to sell.
Melbourne homes now an average of 43 days to sell over the March quarter, compared to 27 days a year ago, however vendors are discounting their properties by an average of 6.2% compared to 3.8% a year ago to affect a sale.
But the Melbourne property market is very fragmented, with values of detached houses having fallen more than apartments. Apartment values were down 4.1% over the last year compared with a 12.6% drop in house values.
The resilience across the apartment sector, despite higher supply levels, probably comes back to a combination of affordability
constraints in the market as well as more first home buyers supporting housing demand across the lower price points of the market, thanks to the First Home Owner incentives. Brisbane
Many have been predicting that now is the time that the Brisbane property will finally have its turn in the sun, but despite performing better than much of Australia, CoreLogic report that recently market conditions have softened a little.
Brisbane house values slipped 0.4% lower in the month of April are down 1.9% over the last 12 months despite rising demand from a growing population and relatively affordable prices.
However, the markets are very fragmented, with apartments (-2.4%) continuing to underperform free-standing homes (-1.8%), and some suburbs strongly outperforming others.
The slower Brisbane housing market means that:
The average selling time of a home is 60 days (34 days a year ago) and Vendors are discounting their properties an average of 4.7% to affect a sale (4.2% a year ago) 9.3% fewer properties sold in the last 12 months compared to the previous year.
We are not expecting the
Brisbane market to have a substantial correction like Melbourne and Sydney are experiencing because the lower property values in Brisbane have made it less susceptible to being caught out in the fallout from the tighter lending restrictions.
At the same time the underlying strong demand from home buyers and investors from the southern States at a time when yields are attractive and housing affordability is relatively healthy and putting a floor under property prices.
Our property markets are slowing
CoreLogic report the number of property transactions is down 14.4% nationally year on year, Adelaide and Darwin were the only cities in which sales volumes rose over the year.
Other signs of our slowing property markets are rising Days on Market (the time it takes to sell a property) which is a sign that there more properties available for sale then there are active buyers, and also the increase
vendor discounts necessary to sell a property.
Vendors seem to have got the message that it isn’t a great time to sell, with fewer new listings being added to the market than over recent years, while total advertised stock levels are tracking much higher, due to a slower rate of absorption.
Auction clearance rates are higher than they were late in 2018 but much lower than a year ago with volumes also much lower.
Our rental markets are also doing it tough
Rental markets continue to trend lower.
National rents were 0.3% higher over the month and 0.4% higher over the past year which remained at their slowest annual rate of growth on record (data from 2005).
Rental yields have continued to lift from their record lows as rental growth outpaces value growth, however, yields generally remain well below the long term average in most cities
Other market indicators
The trend in population growth has eased over the twelve months ending March 2018, as both the rate of net overseas migration and the rate of natural increase fell. Slower population growth has a negative implication for housing demand.
Dwelling approvals are trending lower and
expected to fall further, despite a slight increase over the month.
Housing finance data and credit aggregates highlight the slowdown in mortgage demand.
housing finance commitments were slightly higher in February, they are substantially lower year-on-year.
Housing credit is growing at an historically low annual rate of 4.0% with owner-occupier credit growth slowing to 5.7% while investor credit growth increasing at a historic low rate of 0.7%.
Official interest rates remain at 1.5%, however, the expectation from the market is that cuts are more likely than increases from here.
In fact, if employment figures don’t improve we could have the first of a number of
rate cuts very soon.