Three capital cities record a fall in home values as momentum leaves the cycle

Source: CoreLogic

While headline growth rate remains positive, three capitals recorded a decline in values over the past three months with Melbourne falling -0.9%.

However, while the headline growth rate remains positive, it is clear momentum is leaving the cycle and conditions are becoming more diverse.

The rolling quarterly pace of growth has slowed markedly in Sydney to 1.1%, a fraction of the 5.0% quarterly gain recorded at the same time last year. 

The mid-sized capitals are continuing to buck the slowing trend, Brisbane values rose at a quarterly pace of 3.8%, though this is down from a 4.7% increase seen this time last year.

CoreLogic’s research director, Tim Lawless, said available supply is a key factor explaining the diverse outcomes in housing growth trends. “The number of homes for sale in Brisbane, Adelaide and Perth is more than 30% below average for this time of the year.

An erosion in borrowing capacity and affordability factors is skewing demand towards the lower price points of the market, with lower quartile values leading the growth trend across every capital city.

Units are now rising faster than houses across most of the capitals.

The underlying mismatch between housing supply and demand looks set to support housing prices through the second half of the year, however there does seem to be some rebalancing underway.

Real estate listings have been flowing onto the market at a pace slightly above average through autumn and winter, which has been testing the depth of buyer demand. 

Investors are taking a larger share of demand. A key trend emerging from ABS lending indicator data is the upswing in lending for investment purposes.  Nationally, the number of investor loans are up 24.8% on last year and the value of lending to investors has jumped 29.5% over the year to comprise 37.1% of mortgage demand.

The outlook for the housing sector remains complicated. While constraints on new housing supply are likely to keep a floor under home prices and remain a feature of the market for some time yet, downside risks are growing.