Below trend growth to continue
CoreLogic’s national home value index moved through its sixth month of decline last month, with values down a further 1.2%, taking the cumulative drop from the market peak to 6.0%.
The geographic scope of Australia’s housing downturn broadened through October with every capital city and rest-of-state region, apart from regional South Australia, recording a drop in housing values.
Across the capital cities the month-on-month decline ranged from a -2.0% fall in Brisbane to Perth where dwelling values nudged only -0.2% lower. Across the rest-of-state regions, monthly falls of more than -1% were recorded across New South Wales, Victoria and Queensland.
Although more regions are recording a fall in housing values, the rate of decline remains diverse. The pace of falls has eased over the past two months across Sydney and past three months in Melbourne but has gathered momentum in Brisbane where home values are now falling the most rapidly of any capital city or rest-of-state region. The changing dynamic across the largest cities has seen the rate of decline across the combined capitals index ease from a -1.6% drop in August to -1.4% in September and -1.2% in October.
Despite the easing in the pace of decline, it’s probably still too early to claim the worst of the decline phase is over. Australian borrowers are facing the double whammy of further interest rate hikes along with persistently high and rising inflation. There is a genuine risk we could see the rate of decline re-accelerate as interest rates rise further and household balance sheets become more thinly stretched.
To-date, the housing downturn has remained orderly, at least in the context of the significant upswing in values. This is supported by a below-average flow of new listings that is keeping overall inventory levels contained. There’s also tight labour market conditions, an accrual of borrower savings and a larger than normal cohort of fixed interest rate borrowers, who have so far been insulated from the rapid rise in interest rates.
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