Housing slump spreading beyond city limits
The big two markets of Sydney and Melbourne are continuing to drive a housing downturn in Australia, but fresh property data shows that the slump went well beyond city limits in 2018.
CoreLogic’s latest Hedonic Home Value Index shows that national dwelling values fell 2.3 per cent over the December quarter – the worst quarter-on-quarter decline since 2008 – with most regions recording a weaker performance as national values dropped 4.8 per cent in total in
2018.
Dwelling values went down in four of the eight capital cities over the calendar year, led by Sydney (-8.9 per cent) and Melbourne (-7 per cent), while values were also lower across Perth (-4.7 per cent) and Darwin (-1.5 per cent).
Adelaide, Brisbane and Canberra saw slight increases, but conditions weren’t as strong as in
2017, with every capital city recording a weaker pace of growth or an accelerated decline over the year.
‘‘Although Australia’s two largest cities are the primary drivers for the weaker national reading, most regions around the country have reacted to tighter credit conditions by recording weaker housing market results relative to 2017,’’ said CoreLogic head of research Tim Lawless.
‘‘Such a soft result amongst the best-performing areas highlights that housing market weakness is broad-based and not just confined to Sydney and Melbourne.’’
The two exceptions were regional Tasmania, where the pace of capital gains was higher, resulting in a nation-leading 9.9 per cent gain in values, and Darwin, where the annual rate of decline improved from -8.9 per cent in 2017 to -1.5 per cent in 2018.
The strongest capital city subregions were confined to Hobart, Canberra, Brisbane and Adelaide, where housing prices are generally more affordable relative
to household incomes, although housing affordability has rapidly deteriorated across Hobart.
Even the best-performing regions returned a relatively mild annual growth rate. Seven of the top 10 sub-regions returned an annual gain of less than 3 per cent.
The weakest capital city subregions were primarily located across the regions of Sydney, which comprised eight of the top
10 weakest capital city markets in
2018.
Despite Sydney’s dominance of the weakest-performing areas, Melbourne’s Inner East, which includes some of the city’s most expensive properties, topped the list for the largest annual decline in dwelling values. These were down 13.4 per cent, followed closely by Sydney’s Ryde, where values were 13.3 per cent lower.
The strongest regional performers
‘‘Most regions around the country have reacted to tighter credit conditions by recording weaker housing market results.’’
Tim Lawless, CoreLogic
for 2018 were in Tasmania and Victoria. The weakest regional areas comprise a broader range of locations, from agricultural regions where drought conditions and low demand are weighing down the market, through to previously strong markets adjacent to Sydney such as Newcastle and Lake Macquarie, Illawarra, the Southern Highlands and Shoalhaven.
Lawless said access to finance was likely to remain the most significant barrier to an improvement in 2019. ‘‘Lenders are understandably risk-averse against a backdrop of falling dwelling values, high household debt, rising supply, and heightened regulatory focus.’’
A burst housing bubble remains the greatest risk to the nation’s economy, according to the Organisation for Economic Co-operation and Development.