By Donie Collins, Director of DMC Property Advisory

CoreLogic’s national Home Value Index (HVI) recorded a second consecutive month of value declines in June, down -0.6%, to be -0.2% lower over the June quarter. Continued falls in Sydney dwelling values (-1.6% month and -2.8% quarter) and Melbourne (- 1.1% month and -1.8% quarter) were the primary drivers of this month’s steeper drop, but housing values were also down in Hobart (-0.2% month and -0.1% quarter) as well as regional Victoria (-0.1% month and +1.2% quarter).

Every capital city and broad rest of state region is now well past their peak rate of growth as trend rates eased across the remaining markets. Australia’s third largest city, Brisbane, has seen growth in housing values flatten out to just 0.1% in June, while Adelaide remains the only capital still recording a monthly growth rate higher than 1.0% (1.3%). Growth in Perth’s housing values, which were temporarily showing a second wind as state borders reopened, are again losing steam with values up 0.4% in June.

CoreLogic Research Director, Tim Lawless, noted the housing market’s sharper reduction in growth coincides with the May cash rate hike, surging inflation and low consumer sentiment. “Housing valuegrowth has been easing since moving through a peak in March last year, when early drivers of the slowdown included rising fixed term mortgage rates, an expiry of fiscal support, a trend towards lower consumer sentiment, affordability challenges and tighter credit conditions,” he said.

“More recently, surging inflation and a rapidly rising cash rate have added further momentum to the downwards trend. Since the initial cash rate hike on May 5, most housing markets around the country have seen a sharper reduction in the rate of growth. “Considering inflation is likely to remain stubbornly high for some time, and interest rates are expected to rise substantially in response, it’s likely the rate of decline in housing values will continue to gather steam and become more widespread.”

The combined regionals index remained in positive growth territory in June, albeit slightly, rising 0.1%, reducing quarterly growth from a peak of 6.6% in April last year, to 2.0% over the three months to June. In contrast, the combined capital cities index was down -0.8% over the June quarter, reducing from a peak of 7.1% over the three months to May last year.

Unit markets are holding their value a little better than houses across the largest capitals. Sydney recorded a -3.0% drop in houses values through the June quarter compared with a -2.1% fall in unit values. Melbourne also showed a smaller quarterly decline in units relative to houses at -0.5% and - 2.4% respectively. “The stronger performance across the unit sector comes after house values consistently outperformed units through the upswing,” Mr Lawless said. “Since the onset of the pandemic in March 2020, capital city unit values have risen 9.8% compared to 24.7% for houses, resulting in better affordability across the medium to high density sector.”

Nationally, rents increased 0.9% in June, taking the annual growth rate to 9.5%. This is the highest annual growth rate since December 2007 when record levels of overseas migration pushed rental demand higher. “Such strong rental conditions through the current cycle have occurred largely in the absence of overseas migration, although the reopening of international borders is likely now adding further upwards pressure on rental demand,” Mr Lawless said. “A reduction in average household size through the pandemic helps to explain such high rental demand during a time of closed international borders. Additionally, overall rental supply has probably been negatively impacted by the long running downturn in investment activity between 2015 and 2021.”

Donie Collins

DMC Property Advisory

0405 958 597

dcollins@dmcproperty.com.au

www.dmcproperty.com.au