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National dwelling values dropped for an eleventh month, with five capital cities recording a drop.
Since peaking in September last year, dwelling values have been consistently tracking lower, down a cumulative 2.2% through to the end of August.
The only cities where dwelling values edged higher in August were Adelaide (0.3%), Darwin (0.1%) and Canberra (0.5%).
CoreLogic head of research Tim Lawless said, “Weaker housing market conditions can be tied back to a variety of factors, foremost of which is the tighter credit environment which has slowed market activity, especially amongst investors.
“Fewer active buyers has led to higher inventory levels and reduced competition in the market.
“Collectively, these factors have been compounded by affordability challenges, reduced foreign investment and a rise in housing supply.”
Focusing on the three month trend shows Melbourne is now Australia’s weakest capital city housing market, with dwelling values falling 2.0% over the three months ending August.
Perth isn’t far behind, with values down 1.9% over the past three months, reversing the temporary positive movements recorded earlier in the year.
Over the year to date, the weakest housing market conditions are concentrated in Sydney and Melbourne where dwelling values were previously rising the fastest, but have now fallen 3.5% and 3.3% respectively over the first eight months of the year.
According to CoreLogic, considering the sheer size of the cities Sydney and Melbourne comprise approximately 60% of Australia’s housing market by value, and 40% by number, the weaker performance in these cities has a significant drag down effect on the combined capitals and national reading of the market.
The regional markets have also continued to weaken, with values slipping lower for the second consecutive month across the combined rest of state index to be down 0.2% over the month and 0.6% lower over the rolling quarter.
Regional areas of the mining states continue to deliver the most significant drag on the headline growth rates, with values down 3.5% over the past three months across regional WA and 1.0% lower across regional Queensland.
According to Lawless, the overall housing market weakness is heavily concentrated across the premium sector of the market.
The CoreLogic stratified hedonic index recorded a 5.4% fall in values across the upper quartile of the combined capitals over the past twelve months, while the broad middle of the market is down 0.5% over the year and the most inexpensive quartile has recorded a 0.6% rise in values.
This trend towards weaker premium housing market conditions is largely attributable to larger falls across Sydney and Melbourne’s most expensive quarter of properties where values are down 8.1% and 5.2% over the past twelve months.
Lawless said, “The trend towards more robust housing market conditions for affordable properties can be seen geographically as well, with the top ten capital city sub-regions, based on an annual capital gain, generally located in more affordable areas such as Hobart, the outskirts of Melbourne and parts of Brisbane and Adelaide.
“On the other hand, the weakest performing sub-regions are primarily located across Sydney as well as Melbourne’s prestigious Inner East.”
”Stronger market conditions across Australia’s more affordable areas are likely attributable to a rise of first home buyers in the market as well as changing credit policies focused on reducing exposure to high debt-to-income ratios.
“In the higher value cities like Sydney and Melbourne, we’re seeing typical dwelling prices remain more than 8 times higher than median household incomes, suggesting tighter credit conditions for borrowers with a high debt-to-income ratio will likely impact on demand more in these cities over others.”
