The Australian housing market has had its first annual fall in values since 2012, according to the May CoreLogic Home Value report.
National values declined by 0.1% in May, dropping 0.3% in the quarter and 0.4% annually.
Falling prices in Sydney and Melbourne led the decline, though it was somewhat offset by strengthening regional prices, said CoreLogic’s Head of Research, Tim Lawless.
“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,” said Lawless. “The combined regional markets have helped to offset a broader decline, with dwelling values consistently rising.”
Resilience in most affordable housing
The most expensive quarter of the Australian property market recorded a 1.3% decline in values, the only segment to record an annual decline, said CoreLogic. Conversely, the most affordable quarter rose by 1%.
“The resilience across the most affordable quarter of the market in Sydney and Melbourne is likely attributable to the higher proportion of first home buyers,” said CoreLogic.
Sydney’s top 25% most expensive properties dropped by 7.1% since their peak, while the least expensive quarter fell by 1.4%.
In Melbourne, the 25% most expensive properties have decreased in value by 3.3%, while the most affordable did not decline at all.
Hobart home prices are up 12.7% over the year with Geelong in NSW seeing a 10.2% increase.
CommSec Chief Economist Craig James said in a note that the data showed prices appeared firm in Tasmania generally, the central west of NSW, Coffs Harbour, Newcastle, the Southern Highlands in NSW and on the Sunshine Coast in Queensland.
Sydney and Melbourne prices to keep falling
The combined capital city prices fell by 0.2% in May, dropping to 0.6% in the quarter and down 1.1% annually. “In our view the trend toward falling monthly prices in Sydney and Melbourne is likely to continue through till 2020,” said CommBank Economist Michael Workman in a note published after the data was released.
“There are a number of factors that will continue to weaken purchase demand. Tighter lending conditions imposed on borrowers, weaker investor demand as prices fall and a withdrawal by foreign investors are undermining buyer demand,” Workman said.
“It occurs in a period when new residential construction has been running at high levels over the past few years,” said Workman.
CommSec’s James noted that while “there may be a short period where Sydney and Melbourne prices fall on an annual basis” it comes “after a long period of out-performance”.
“Over the past five years, Sydney home prices rose by 55%, with Melbourne prices up 50%,” he said in a note published after the data was released.
The average Australian capital city house price (median price) was $694,797 and the average unit price was $574,915, according to the CoreLogic data.
Regional markets continue to rise
The combined regional markets saw prices increase by 0.2% in May, pushing to 1.0% for the quarter and 2.2% over the past year.
The strongest performing region was Geelong, which has had a 10.2% positive annual change. In general, the weakest performing regional areas are still linked to mining and resources, said CoreLogic.