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National housing values decline 'comparable with the onset of GFC'

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By Adrian Suljanovic
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3 minute read

Australian housing values have continued to fall for the third consecutive month.

CoreLogic’s national Home Value Index has fallen -1.3 per cent in July bringing values down to -2 per cent below April’s peak after the 28.6 per cent surge during the pandemic growth phase.

Five of Australia’s capital cities have recorded a month-on-month decline in July, with Sydney and Melbourne leading the decline. Values fell -2.2 per cent in Sydney and -1.5 per cent in Melbourne. Brisbane fell into negative growth since the first time since August 2020, dropping by -0.8 per cent, meanwhile Canberra and Hobart also recorded value drops of -1.1 per cent and -1.5 per cent respectively.

Despite Adelaide, Darwin, and Perth all staying within positive-growth territory during July (+0.4 per cent, +0.5 per cent and +0.2 per cent respectively), most of these markets recorded a stark slowdown in the pace of capital gains since May’s interest rate hike.

Tim Lawless, CoreLogic’s research director, stated that the housing market conditions are “likely to worsen” as interest rates continue to skyrocket through the year.

“The rate of growth in housing values was slowing well before interest rates started to rise. However, it’s abundantly clear markets have weakened quite sharply since the first rate rise on 5 May,” Mr Lawless said.

Mr Lawless further stated that while the decline is only three months in, the Home Value Index indicates that the rate of decline is “comparable with the onset of the global financial crisis (GFC) in 2008, and the sharp downswing of the early 1980s”.

“In Sydney, where the downturn has been particularly accelerated, we are seeing the sharpest value falls in almost 40 years,” Mr Lawless said. 

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“Due to record high levels of debt, indebted households are more sensitive to higher interest rates, as well as the additional downside impact from very high inflation on balance sheets and sentiment.”

Along with the city regions, the nation’s regional markets have also weakened. The combined regionals index recorded its first monthly decline since August 2020 of -0.8 per cent, with regional NSW dropping by -1.1 per cent, -0.7 per cent in regional Victoria and Queensland, and -0.6 per cent in regional Tasmania, while regional SA and WA recorded higher trending values with 1.1 per cent for SA and 0.1 per cent for WA.

Although the regional markets continue to outperform their capital city counterparts, this monthly figure revealed that major regional centres are not immune to decreasing home values.

The CoreLogic combined regional index was up 41.1 per cent from the pandemic through to the June peak, in comparison to the 25.5 per cent rise across the combined capitals index.

Mr Lawless said that the stronger growth “reflects a significant demographic shift towards commutable regional markets,” and that it is likely to have some “permanency” as more of the workforce continue with “formalised hybrid employment arrangements”.

The regional centres adjacent to Sydney, Melbourne and Brisbane all recorded home value declines over the three months into July, ending close to two years of significant capital gains.

Values of units in the combined capitals recorded smaller declines overall when compared to house values. Unit values dropped -1.0 per cent in July while houses dropped -1.5 per cent.

“This trend is most apparent across the three largest capitals as well as Canberra, where housing affordability challenges may be deflecting more demand towards the medium to high-density sector,” Mr Lawless said.

“Additionally, firmer interest from investors should favour the unit market over houses where demand has historically been more concentrated.”

National housing values decline 'comparable with the onset of GFC'

Australian housing values have continued to fall for the third consecutive month.

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