Premium housing market starting to soften

The report provides a detailed analysis at different levels of Australia’s property market by dividing the market into 10 equal groups (or deciles) based on tiers of property value.

For the May report, based on data to the end of April 2018, the 10th (premium) decile nationwide were properties valued over $1,212,486.

The most affordable decile range had a value of $256,786 or lower.

By analysing changes in dwelling values across each decile, the report identifies which parts of the market are over or underperforming relative to the headline trends, summarising property market conditions nationally and across each of the capital cities.

The broad trend findings in the CoreLogic May Decile Report showed that values have been falling on an annual basis across the 10th decile (the premium end of the market), while all other valuation deciles enjoyed positive (albeit restrained) growth over the 12 months to April 2018.

National dwelling values were 0.2 per cent higher over the 12 months to April 2018 — the slowest annual rate of growth since values fell by -0.3 per cent over the 12 months to October 2012.

Analysing deeper at a decile level, it was only the most expensive 10 per cent of properties that recorded a fall in values over the year (-4.3 per cent) and all other sectors recorded annual growth greater than 0.2 per cent.

“The softening premium property market trend became even more evident when we assessed it from a quarterly basis, with values trending lower across the three most expensive property deciles,” CoreLogic research analyst Cameron Kusher said.

“By contrast, the more affordable decile ranges remained in subtle growth over the past three months, and it was the most affordable 10 per cent of properties that recorded the greatest quarterly value increase, up [by] 1.6 per cent. This data highlights how weakness across the most expensive property values can exacerbate weakness across the broader housing market.”

However, Mr Kusher noted that the trend does vary by location.

“The more affordable end of the market is the strongest across Sydney, Melbourne and Brisbane, whereas Perth is showing the strongest performance at the premium end of the property market.

“Adelaide is demonstrating good strength in the middle valuation brackets, while Hobart’s growth appears to be very broad-based.”

According to Mr Kusher, the trends across each decile suggest that stronger housing market conditions are persisting across the most affordable end of the valuation spectrum, potentially supported by a surge in first home buyer activity and mounting affordability constraints at the higher value end of the market.

“The countrywide trends will also reflect that fact that more expensive properties are located in the capital cities or more specifically Sydney and, to a lesser extent, Melbourne,” the analyst said.

“The overall weaker performance across these two property markets will place some downwards bias across the higher deciles.”

[Related: Sydney house prices to drop by 5.4% by 2020]