National dwelling values lowest level since 2012

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Home dwelling values across Australia have dropped to their lowest level since 2012, according to the results of CoreLogic’s latest Hedonic Home Value Index. The average figure skidded by an annualised 0.4% in May to $555,274, signifying that the housing market downturn is becoming more entrenched.

May also marked the eight straight month-on-month fall since the market peaked September 2017. Since then, prices have fallen 1.1%.

Corelogic attributed the downturn to softening market conditions brought by stricter lending standards, similar to a slump from late 2015 to early 2016.

“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,” said CoreLogic head of research Tim Lawless in a statement.  “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.”

In particular, the New South Wales capital saw a 4.2% drop in its average home dwelling value to $871,454. Melbourne fared better with an annualized 2.2% increase to $717,020, but this was still a 1.2% drop over the quarter. Hobart posted the best performance with a 18.4% yearly rise to $430,429, while Darwin stood at the opposite end with a 7.9% decline to $434,134.

Regional markets are outperforming the capital cities, and CoreLogic indices revealed a wider gap forming between capital city growth trends and regional areas.

Looking ahead, Lawless does not expect a rebound in housing conditions any time soon. “With finance restrictions likely to remain tight, despite lifting the 10% growth cap on investment lending next month, the chances of a rebound in housing market conditions over the coming months is unlikely. Investors are still facing a premium on their mortgage rates of approximately 60 basis points; more if they are not paying down the principal.”

“Add to that the fact that lenders have intensified scrutiny around a borrower’s expenses and are now less willing to originate loans on interest only terms,” he said.


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