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CoreLogic Home Value Index rate of decline eases despite -1.0% fall in January

CoreLogic’s national Home Value Index (HVI) fell a further -1.0% in January, a slight improvement on the -1.1% decline recorded in December, and the smallest month-on-month decline since June last year.

The reduction in the rate of decline was evident across most capital cities, except for Adelaide (-0.8%) and Perth (-0.3%) where housing values have held firmer since interest rates began rising in May.

CoreLogic Research Director Tim Lawless said although the housing downturn remains geographically broad-based there are signs some momentum has left the housing downturn.

“The quarterly trend in housing values is clearly pointing to a reduction in the pace of decline across most regions, however at -1.0% over the month and -3.2% over the rolling quarter, national housing values are still falling quite rapidly compared to previous downturns,” Mr Lawless said.

Every capital city posted a decline in dwelling values through the month, led by Hobart (-1.7%) and Brisbane (-1.4%), while the smallest drops were recorded in Perth (-0.3%) and Darwin (-0.1%).

Sydney’s median dwelling value dropped below $1 million for the first time since March 2021, falling -1.2% in January, an improvement on December’s -1.4% decline.

The most noticeable easing in value falls can be seen across the premium end of the housing market, where the country’s most expensive properties have led both the recent upswing as well as the current downturn. Across the combined capitals, the rolling quarterly rate of decline in the upper quartile values has improved from a recent low of -6.1% over the September 2022 quarter to -4.0% over the three months to January.

“While this trend towards improving conditions across premium markets is not evident in all cities, it is most apparent in Sydney’s detached house market. Quarterly declines in this market segment eased from -7.7% in the three months to August, to -3.9% in the three months to January. The improvement could be reflective of more buyers taking advantage of larger price drops across the premium sector, where house values are down -17.4% since peaking in January 2022,” Mr Lawless said.

Through January, regional housing values continued to record a milder rate of decline than each of their capital city counterparts, a trend seen through most of the downturn to-date.

The milder decline comes after a substantially stronger upswing. Across the combined non-capital city areas of Australia, housing values surged 41.6% higher through the upswing compared with a 25.5% rise in values across the combined capital cities. Since peaking in June, the combined regionals index is down -7.4%, while capital city values are now -9.6% below their April peak.

“Despite easing rates of internal migration and a partial erosion of the pre-pandemic affordability advantage, regional housing values are holding up better than capital city markets,” Mr Lawless said.

"This will be an interesting trend to watch over the longer term, but at the moment it seems regional housing markets have seen a structural shift in the underlying demand profile. With more Australians willing to base themselves outside of the capital cities and remote working remaining a viable option across some sectors of the labour force, it’s unlikely we’ll see a mass exodus from regional markets.”

January marked a new record for how much and how fast dwelling values have fallen in Australia. Based on the monthly index, the national HVI is down -8.9% since peaking in April last year, making this the largest and fastest decline in values since at least 1980 when CoreLogic’s records began.

So far, Brisbane (-10.8%*) and Hobart (-10.8%) have registered the largest declines on record for those cities. Sydney home values are down -13.8% and not far from surpassing the 2017-19 drop of -14.9% to set a new decline record.

However, Mr Lawless stressed the importance of understanding this downturn in context.

“Record declines in home values follow a record upswing, both in magnitude and speed. The national HVI was up a stunning 28.6% in the space of just 19 months,” he said.

“Despite the recent sharp drop in values, every capital city and rest-of-state region is still recording home values above pre-pandemic levels, although Melbourne’s index would only need to fall a further -0.4% before equaling the March 2020 reading.”

* Brisbane's decline to date of 10.8% is calculated based on movements in the Daily HVI

Low advertised supply remains a feature of the housing market through January, as the flow of new listings holds well below average for this time of the year. New capital city listings added to the market over the four weeks ending January 29 were -22.2% lower than over the same period last year and -24.5% below the previous five-year average. Every capital city recorded a below average number of new listings through January, reflecting an ongoing reluctance from prospective vendors to test the market.

“Such a low number of new listings implies most home owners don’t need to sell, rather, they seem to be prepared to wait this downturn out,” Mr Lawless said. “This trend of lower than normal levels of new listings has been persistent through spring and early summer and looks to be continuing into 2023.”

Housing demand has also fallen away. Capital city dwelling sales over the past three months were estimated to be -29.4% lower relative to the same period in 2022 and -11.5% below the previous five-year average.

Sydney (-40.6%), Melbourne (-39.8%) and Brisbane (-36.5%) have had the largest quarterly drop in sales relative to the same period last year. At the same time, cities where home values have held firmer have also recorded much smaller falls in home sales. The rolling quarterly estimate of dwelling sales across Adelaide was only -2.8% lower than a year ago, Perth sales were -3.6% lower and in Darwin home sales were estimated to be 19.6% higher, albeit with some volatility.

Mr Lawless said it’s unlikely listing and purchasing activity will return to average levels until consumer sentiment starts to improve.

“There is a strong relationship between consumer attitudes and the number of homes sales. With sentiment remaining around recessionary lows, it’s harder for consumers to make high commitment decisions such as buying or selling a home,” he said. “Until Australians have a higher level of confidence with regards to their household finances and the outlook for the economy, its likely they will continue to delay major financial decisions.”

Source

corelogic.com.au | 01/02/2023

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