Weaker housing markets in capital cities in Australia, particularly Melbourne and Sydney, have dragged property growth down by 1.1% in the 12 months to May 2018, the latest index shows.
Overall prices are also down 0.6% quarter on quarter and 0.2% month on month but regional markets are doing better, with prices up 0.2% on a monthly basis, 1% quarter on quarter and 2.2% on an annual basis.
The figures from real estate firm CoreLogic, also show that this means nationwide prices fell by 0.1% month on month, by 0.3% quarter on quarter and by 0.4% year on year to an average of $555,274.
It is a sign that the housing market is becoming more entrenched, according to Tim Lawless, head of research at CoreLogic. He pointed out that May marked the eighth consecutive month on month fall since the national market peaked in September last year, taking the cumulative fall in values to 1.1% through to the end of May 2018.
‘Similar to the current softening in housing market conditions, the previous downturn, which ran briefly from late 2015 to early 2016, was also driven by tighter credit conditions. It lasted for only five months nationally, with national dwelling values falling by 97 basis points before surging higher again on the back of two 25 basis point cuts to the cash rate which led to a rebound in housing credit growth,’ said Lawless.
A breakdown of the figures show that in Sydney prices fell by 0.2% month on month, by 0.9% quarter on quarter and by 4.2% year on year to a median value of $871,454 while in Melbourne prices were down 0.5% month on month, 1.2% quarter on quarter but at $717,020 are still 2.2% higher than May 2017.
The best performing capital city is Hobart in Tasmania where prices increased by 0.8% month on month, by 3.7% quarter on quarter and by 12.7% year on year to $430,429. In Brisbane prices increased by 0.2% on a monthly and quarterly basis and at $494,038 prices are 0.9% higher than a year ago. Adelaide also saw positive growth, up 0.5%, 0.3% and 0.6% to $437,234.
Elsewhere the growth is more sporadic. In Darwin prices fell by 0.2% month on month but were up 1.3% on a quarterly basis, but are 7.9% below a year ago at $434,134. In Canberra prices are up 2.3% year on year and 0.8% quarter on quarter but fell by 0.1% on a monthly basis to $592,954. While in Perth prices fell 1.8% year on year, increased 0.1% quarter on quarter then fell by 0.1% month on month to $463,319.
‘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,’ said Lawless.
‘Sydney and Melbourne comprise approximately 60% of Australia’s housing market by value, and 40% by number, so the performance of these two cities has a larger effect on the headline market performance,’ he explained.
He also pointed out that the combined regional markets have helped to offset a broader decline, with dwelling values consistently rising, albeit at a much lower pace relative to the growth seen in Sydney and Melbourne over the previous growth phase. Indeed, values outside of the capital cities nudged 0.2% higher over the month to reach a new record high in May.
Melbourne has taken over from Sydney as the weakest performing housing market over the past three months. The quarterly fall of 1.2% is the largest decline in Melbourne prices over a three month period since February 2012. He added that price growth in Hobart is showing little signs of slowing down.
‘Melbourne’s housing market was previously looking more resilient to value falls relative to Sydney. Recently, however, auction clearance rates have been deteriorating, inventory levels are rising and transaction activity is tracking 12.9% lower than one year ago,’ Lawless said.
