National housing values fall for third consecutive month

Australian dwelling values fell by -1.3% in July, marking the third consecutive month CoreLogic’s national Home Value Index has fallen.  After national dwelling values surged 28.6% through the pandemic growth phase, values are now -2.0% below April’s peak.

Five of the eight capital cities recorded a month-on-month decline in July, led by Sydney and Melbourne where values fell -2.2% and -1.5% respectively.  Brisbane also edged into negative growth territory for the first time since August 2020, with values down -0.8%, while Canberra (-1.1%) and Hobart (-1.5%) were also down over the month.  

Perth (+0.2%), Adelaide (+0.4%) and Darwin (+0.5%) remained in positive growth through July, however most of these markets have recorded a sharp slowdown in the pace of capital gains since the first interest rate hike in May.

CoreLogic’s Research Director, Tim Lawless, said housing market conditions are likely to worsen as interest rates surge higher through the remainder of the year. 

“The rate of growth in housing values was slowing well before interest rates started to rise, however, it’s abundantly clear markets have weakened quite sharply since the first rate rise on May 5,” he said.  

“Although the housing market is only three months into a decline, the national Home Value Index shows that the rate of decline is comparable with the onset of the global financial crisis (GFC) in 2008, and the sharp downswing of the early 1980s. In Sydney, where the downturn has been particularly accelerated, we are seeing the sharpest value falls in almost 40 years.

“Due to record high levels of debt, indebted households are more sensitive to higher interest rates, as well as the additional downside impact from very high inflation on balance sheets and sentiment.”

Regional markets have also weakened, with the combined regionals index recording the first monthly decline (-0.8%) since August 2020.  Dwelling values were down across Regional New South Wales (-1.1%), Regional Victoria (-0.7%), Regional Queensland (-0.7%) and Regional Tasmania (-0.6%), while values continued to trend higher in Regional SA (1.1%) and Regional WA (0.1%).  Overall, regional markets are still outperforming their capital city counterparts, but this month’s figures show major regional centres are not immune to falling home values.

“Dwelling values across CoreLogic’s combined regionals index were up 41.1% from the pandemic trough to the June peak, compared with a 25.5% rise across the combined capitals index.  The stronger growth reflects a significant demographic shift towards commutable regional markets, which is likely to have some permanency as more workers take advantage of formalised hybrid employment arrangements,” Mr Lawless said.

Most of the major regional centres adjacent to Sydney, Melbourne and Brisbane (including Geelong, Ballarat, Illawarra, Newcastle and Lake Macquarie, the Southern Highlands & Shoalhaven, the Gold Coast and Sunshine Coast) recorded a decline in home values over the three months to July, marking the end of nearly two years of significant capital gains.

Unit values across the combined capitals are generally recording smaller falls relative to house values, down -1.0% and -1.5% in July respectively.

“This trend is most apparent across the three largest capitals as well as Canberra, where housing affordability challenges may be deflecting more demand towards the medium to high density sector,” Mr Lawless said.  “Additionally, firmer interest from investors should favour the unit market over houses where demand has historically been more concentrated.”