Continued prices falls heralds weaker housing markets in Australia in 2018

Property prices fell in Australia in December, led by declines in Sydney, Darwin, Melbourne and Perth with the weaker housing market likely to continue throughout 2018.

The latest index data from real estate firm CoreLogic reveals that month on month prices fell 0.4% in capital cities to an average of $656,161 and nationally they were down 0.3% to $548,817. But in the regions prices were up 0.2% to $355,994.

The biggest month on month fall was in Sydney with a decline of 0.9% to $895,342 but prices are still 3.1% above a year ago, along with Darwin where prices also fell 0.9% to $424,901 with values now down 6.5% year on year.

Prices fell by 0.2% in Melbourne to £720,417 but are 8.9% higher than a year ago, and in Perth they fell by 0.1% to $463,886 and are now 2.3% lower than December 2016. Prices were flat in Brisbane month on month at $491,391 and are 12.1% above a year ago.

A few cities saw prices rise marginally month on month with values up 1.5% in Hobart to $403,800 and by 0.2% in Canberra and Adelaide to $591,011 and $432,772 respectively. Prices in Hobart are up 17.8% year on year, the biggest annual growth, and up annually by 9.6% in Canberra and by 7.4% in Adelaide.

The transition towards weaker housing market conditions has been clear but gradual and is likely to continue throughout 2018 according to CoreLogic head of research Tim Lawless.

‘From a macro perspective, late 2016 marked a peak in the pace of capital gains across Australia with national dwelling values rising at the rolling quarterly pace of 3.7% over the three months to November,’ he said.

‘In 2017 we saw growth rates and transactional activity gradually lose steam, with national month-on-month capital gains slowing to 0% in October and November before turning negative in December,’ he added.

According to CoreLogic, the 0.3% fall in December was the catalyst for dragging the quarterly capital gains result into negative territory for the first time since the three months ending April 2016.

Nationally, values were 4.2% higher over the 2017 calendar year which is a slower pace of growth relative to 2016 when national prices rose 5.8% and in 2015 when values nationally were 9.2% higher.

Lawless confirmed that the shift to falling national prices is being driven by the capital cities, with the combined capitals tracking 0.5% lower over the December quarter, while across the combined regional areas of Australia, prices were 0.5% higher over the quarter.

Amongst the capitals, the weakest conditions are concentrated in Sydney and Darwin. ‘Sydney’s housing market has become the most significant drag on the headline growth figures,’ said Lawless.

Sydney’s annual rate of growth is now tracking at just 3.1%, a stark difference to the recent cyclical peak when values were rising at the annual rate of 17.1% only seven months ago. Despite the reversal in growth rates since August 2017, Sydney dwelling values remain 70.8% higher than their cyclical low point in February 2012.

Lawless explained that in Darwin the housing downturn is entrenched, with values trending lower since May 2014. Since the 2014 peak, Darwin prices have fallen by a cumulative 21.5%.

But he pointed out that while conditions for capital gains have been exceptionally weak across Darwin, rental prices are down by only 1.5% over the year. The substantial fall in values relative to rents has pushed Darwin rental yields to their highest level since July 2015 at 5.9% and Darwin rental yields are the highest of any capital city.