Housing price downswing ‘comparable’ with GFC onset: CoreLogic

According to the latest Corelogic Home Value Index (HVI) for July, there was a 1.3 per cent decline in Australian dwelling values nationwide.

This was buoyed by value declines in Sydney (-2.2 per cent) and Melbourne (-1.5 per cent) as well as Brisbane (-0.8 per cent), Canberra (-1.1 per cent) and Hobart (-1.5 per cent) during the first month of the financial year.

For the Queensland capital, July represented the first month values entered negative growth territory since August 2020.

Prices bucked the national trend in Perth, where they climbed 0.2 per cent, Adelaide (0.4 per cent) and Darwin (0.5 per cent), however, Corelogic reported that these markets have seen a sharp slowdown in capital gains since rates were first hiked in May.

Corelogic’s research director, Tim Lawless, believes market conditions will worsen as interest rates continue to surge through to the end of 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 explained that despite the relative infancy of the three-month long market downturn the HVI indicates the current rate of decline is “comparable with the onset of the global financial crisis in 2008, and the sharp downswing of the early 1980s,” with Sydney experiencing its sharpest fall in value in nearly 40 years.

He added that record levels of debt, as well as the compounding pressure of high inflation on household budgets, have made a large portion of Australian home owners sensitive to rising interest rates.

Corelogic’s HVI also reported that regional markets have also begun to weaken, having recorded their first monthly decline (-0.8 per cent) since August of 2020. 

Regional NSW (-1.1 per cent), Victoria and Queensland (both -0.7 per cent) and Tasmania (-0.6 per cent) all reported a decline in dwelling values last month, as opposed to South Australia and Western Australia, which rose 1.1 per cent and 0.1 per cent respectively.

“Dwelling values across CoreLogic’s combined regional index were up 41.1 per cent from the pandemic trough to the June peak, compared with a 25.5 per cent rise across the combined capitals index,” Mr Lawless said.

“The stronger growth reflects a significant demographic shift towards commutable regional markets, which is likely to have some permanency as more workers take advantage of formalised hybrid employment arrangements.”

After two years of strong growth, major regional centres close to Sydney, Melbourne, and Brisbane, such as Geelong, Newcastle, Wollongong, the Gold Coast and Sunshine Coast, recorded a decline in home values in the three months leading into July.

Similar trend observed by PropTrack

Rival property analysis body PropTrack has also reported similar losses to housing values over the month of July. 

According to the REA Group-owned outfit’s latest Home Price Index, housing across Australia dropped by 43 bps during last month – driven extensively by a fall in capital cities (-0.52 per cent), but also supported by downturns in regional Australia (-0.18 per cent). 

The biggest fall was in Sydney that reported a 70-bp loss, with the average home now valued at $975,000. 

This was followed by Melbourne (-0.59 per cent), Hobart (-0.50 per cent), the ACT (-0.48 per cent) and regional Victoria (-0.32 per cent). 

Only Western Australia and South Australia reported complete growth during last month, with both of the states’ capitals lifting by 4 bps each. 

Further, regional Western Australia lifted by 24 bps, while regional South Australia experienced the highest growth at 0.33 per cent. 

PropTrack economist, and author of this latest index, Paul Ryan, commented that it’s expected prices to continue falling across the country through the rest of 2022 and into next year. 

“Markets will take time to adjust to sharply higher interest rates, as well as ongoing  uncertainty about the peak for borrowing costs,” Mr Ryan said. 

“This means price falls will likely extend beyond 2022.” 

However, despite the persistent cooling of Australian housing values, PropTrack’s data also reported that prices are distinctively higher than they were prior to the pandemic. 

According to the figures, housing across the country was 32.9 per cent higher over July than what was reported during March 2020. 

This was observed in capital cities, which lifted 27.5 per cent, as well as regional areas, at 48.8 per cent. 

Tasmania was found to have increased the most over this period, with the capital boosting by 48.2 per cent and the rest of the state surging by 54.1 per cent – the highest reported anywhere in the country. 

[Related: House values tipped to sink 15% by 2023’s end]