Growth in Australian housing values continues to lose steam as Sydney records first decline in 17 months

CoreLogic’s national Home Value Index (HVI) posted a 0.6% gain in February, the 17th consecutive monthly increase in the national HVI.  While housing values are generally rising, the pace of growth in the national index has trended downwards since April last year.  February’s growth of 0.6% marks the lowest monthly growth reading since October 2020 and is down from 1.1% in January and a cyclical peak of 2.8% in March 2021.

According to CoreLogic’s director of research, Tim Lawless, every capital city and broad ‘rest of state’ region is now recording a slowing trend in value growth, albeit with significant diversity.

“Sydney and Melbourne have shown the sharpest slowdown, with Sydney (-0.1%) posting the first decline in housing values since September 2020, while Melbourne housing values (0.0%) were unchanged over the month, following similar results in December (-0.1%) and January (+0.2%),” he said.

“Conditions are easing less noticeably across the smaller capitals, especially Brisbane, Adelaide and Hobart, where housing values rose by more than 1% in February.  Similarly, regional markets have been somewhat insulated to slowing growth conditions, with five of the six rest-of-state regions continuing to record monthly gains in excess of 1.2%.”

The stronger housing market conditions in Brisbane and Adelaide can be seen in the quarterly growth figures, with Brisbane housing values rising 7.2% over the past three months to February, while Adelaide is up 6.4% over the same period.  At the other end of the capital city growth spectrum, Melbourne values are 0.2% higher over the past three months while Sydney values have risen by 0.8%.

With the trend in housing values losing pace over the past 11 months, the annual growth trend turned in February. Nationally, home values were 20.6% higher over the past 12 months, down from what is likely to be the peak rate of annual growth recorded at 22.4% last month.

Regional Australia continues to record a substantially higher rate of growth than the capital cities.  Over the past three months, housing values across the combined rest-of–state regions increased at more than three times the speed of housing values across the combined capital cities; 5.7% and 1.8% respectively.

Although the rolling quarterly rate of value growth remains rapid across regional Australia, conditions have eased from a recent peak of 6.4% over the December quarter and is down from a cyclical peak of 6.6% recorded in April last year.

“Regional housing markets aren’t immune from the higher cost of debt as fixed-term mortgage rates rise. These markets are also increasingly impacted by worsening affordability constraints as housing prices consistently outpace incomes. However, demographic tailwinds, low inventory levels and ongoing demand for coastal or treechange housing options are continuing to support strong upwards price pressures across regional housing markets,” Mr Lawless said.

“The slower growth conditions in Australian housing values goes well beyond the rising expectation of interest rate hikes later this year,” Mr Lawless noted.

“The pace of growth in housing values started to ease in April last year, when fixed-term mortgage rates began to face upwards pressure, fiscal support was expiring and housing affordability was becoming more stretched. With rising global uncertainty and the potential for weaker consumer sentiment amidst tighter monetary policy settings, the downside risk for housing markets has become more pronounced in recent months,” Mr Lawless said.