National dwelling values post first annual decline since 2012.
The May CoreLogic home value index confirm that national dwelling values dipped by 0.1% over the month, fueled by weaker conditions in Melbourne and Sydney, and taking the annual change into negative territory for the first time since October 2012.
In a sign the housing market downturn is becoming more entrenched, May marked the eighth consecutive month-on-month fall since the national market peaked in September last year, taking the cumulative fall in dwelling values to 1.1% through to the end of May 2018.
Commenting on the May results, CoreLogic head of research Tim Lawless said, “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. 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.”.
Dwelling values continue to rise across the regional markets. “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. Dwelling values outside of the capital cities nudged 0.2% higher over the month to reach a new record high in May.”.
Adelaide is 0.6% higher year-on-year whilst Hobart’s impressive run of capital gains continued and is showing little signs of slowing down with dwelling values jumping 0.8% over the month to be 3.7% higher over the rolling quarter and 12.7% higher year-on-year.
Tighter credit policies are the key factor in quelling housing market exuberance and first home buyer demand has supported a reduction in investment activity.
While dwelling values are trending lower, weekly rents are rising, albeit at a generally sluggish pace. Nationally, dwelling rents were 0.1% higher over the month and 1.9% higher over the past twelve months. Despite the slow pace of rental growth, most capital city markets are seeing rents rise faster than dwelling values which is placing some upwards pressure on rental yields after a long period of yield compression.