Analyst takes a closer look at market conditions

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The property market this year has been the most diverse ever, and this condition is likely to continue in 2019, according to CoreLogic research analyst Cameron Kusher.

According to CoreLogic's Best of the Best report, national dwelling values declined by 4.1% over the 12 months to November, marking the largest annual fall since December 2011.

As the year progressed, the rate of value declines became faster, especially in Sydney and Melbourne.  These two largest cities, along with Perth and Darwin, recorded falling home values over the year. The rest of the capital markets, meanwhile, posted increases in dwelling values during the same period.

The annual change in dwelling values to November was lower than the annual change from the past year in all capital cities except for Darwin, whose broad weakness was evident across the market.

Across the individual capital cities, the annual changes in values were recorded at -8.1% in Sydney (its largest annual fall since May 1983), -5.8% in Melbourne (its largest annual fall since March 2009), and -0.8% in Darwin. On the other hand, annual values were higher by 0.3% in Brisbane, 1.4% in Adelaide, 4.2% in Perth, 9.3% in Hobart, and 4% in Canberra.

CoreLogic also found that housing market slowdowns were driven by tighter credit conditions, while the economy continued to grow and mortgage rates hit near record low levels. This is different from previous housing market downturns, which have typically been caused by an economic slowdown such as the last recession or the Global Financial Crisis, or higher mortgage rates.

In 2019, Kusher expects a similar condition. He said that decline in values is likely to worsen, driven by Sydney and Melbourne. However, value growth is anticipated to slow or remain stable in most other regions of the country because of the tighter credit conditions.

“To date the Reserve Bank has not been overly concerned with falling dwelling values, largely because it has mostly been contained to Sydney and Melbourne and both cities have seen a substantial run-up in values over recent years. While that may be the case, if the slowing housing market delivers an impact (on) consumer consumption, we could then see a change of (tactics). Were this to happen, we could see some of the temporary macroprudential measures eased back throughout 2019,” he said.

Overall, CoreLogic forecasts that dwelling values will drop further in 2019, with Sydney and Melbourne recording the greatest declines.

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