The cost of housing debt remains at levels not seen since the 1960s.
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Housing market update

First birthdays are usually joyous moments, but for Australia’s housing correction, its 12-month anniversary has many wondering: where to next for the housing market?

It’s a downturn that wasn’t unexpected – but few have a clear idea of where it’s going to end up. According to the latest CoreLogic figures, house prices across the country fell for the twelfth straight month in September, reaching 2.7 per cent below their peak the same time last year.

But who’s leading the ‘charge’ (or should that be fall)? CoreLogic’s September home value index results revealed that 50 per cent of Australia’s capital cities saw values “track lower” over the past year. In fact, Sydney and Melbourne now have the dubious title of being the “primary drag” on the national housing market performance, where house prices slumped by 6.1 per cent and 3.4 per cent respectively.

“We’ve seen Sydney dwelling values drop 6.1 per cent over the past twelve months and Melbourne values are 3.4 per cent lower,” CoreLogic head of research Tim Lawless explains. “Not only are these amongst the largest annual falls across the capital cities, but considering Sydney and Melbourne comprise approximately 60 per cent of the national value of housing, the weak conditions in these cities have a substantial drag down effect on the overall national housing market performance.”

Housing values in regional markets, which have remained fairly robust over the past year, are now showing the effects of challenging market conditions. CoreLogic’s report said that despite regional Western Australia being the only ‘rest of state’ region to record a drop in dwelling values over the past year, the September quarter saw values declining in regional New South Wales (-1.3 per cent), regional Victoria (-0.2 per cent), regional Queensland (-0.6 per cent), regional South Australia (-0.3 per cent) and regional Western Australia (-3.4 per cent).

So, what’s causing the correction? CoreLogic notes that the housing market has slowed “virtually in line” with tighter regulation across the finance sector.

In a statement, Tim Lawless said: “With the release of the banking commission interim report, there is a chance that already tight credit conditions could tighten even further.”


Index results as at September 30, 2018. Source: CoreLogic.

Higher levels of housing supply could create some headwinds for the market

Despite a slowdown in housing demand, a record high number of dwellings are currently under construction across Victoria and South Australia, with CoreLogic revealing that residential dwelling construction is only slightly off a record high in New South Wales.

“With such a substantial pipeline of housing stock in the wings at a time when credit has become less available, investment and foreign buying activity has fallen materially, and population growth is trending lower, this could create some headwinds for the market,” says Lawless.

“This may create some challenges for absorbing newly built housing stock, especially those dwellings targeted specifically towards investors.”


Annual change in dwelling values. Source: CoreLogic


Economic conditions remain strong

With long-term unemployment continuing to track lower, and underemployment reportedly reaching the lowest level since 2014, labour markets are strengthening with solid jobs growth.  If labour market conditions remain firm, CoreLogic says we could see wages growth continue to drift higher from a record low base, increasing housing affordability and debt reduction.

The cost of housing debt remains at levels not seen since the 1960s. And the record low cash rate should help to support housing demand and keep a floor under housing prices.

With dwelling values recording modest falls, or growth rates slowing, housing affordability is improving, which property experts say should see first home buyers become more active in the housing market, helping to offset the reduction in investment activity.

CoreLogic has stressed this is “hardly a crash” and the 2.7 per cent was a slower rate of decline relative to the previous downturn that ran from June 2010 to February 2012, when prices fell 3 per cent over the first year and 6.5 per cent from peak to trough.

CoreLogic’s highlights over the three months to September 2018 include:

  • Best performing capital city: Canberra +1.0 per cent
  • Weakest performing capital city: Melbourne -2.4 per cent
  • Highest rental yields: Darwin 5.6 per cent
  • Lowest rental yields: Melbourne 3.1 per cent


Graphs reproduced with permission from CoreLogic.

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Veda Dante

Veda Dante is an accomplished journalist, consultant and content creator who has nearly 30 years’ experience writing about everything from tourism, hospitality and health to architecture, pools and luxury goods. When she’s not producing copy for clients, this self-confessed word nerd is usually writing and photographing the Byron Bay region for her blog

The opinions expressed in this article are the opinions of the author(s) and not necessarily those of Homeloans Ltd.