Residz Team 3 min read
It’s been a booming couple of years for property prices, but for the first time in nearly two years there’s been a monthly fall in the combined housing values across the nation. It’s another reason buyer FOMO is turning to seller FOMO as homes in some cities hit the market to a degree of apathy.
Recent data released by CoreLogic shows that, even with the 0.5% lift in the combined regional areas and solid results in Brisbane, Adelaide, Perth, and Hobart, home values fell for the overall national market during the month of May.
The national Home Value Index recorded -0.1% in that month, the first negative result since September 2020.
If you live in Sydney or Melbourne, you’ll have noticed homes for sale staying on the market for longer than they did in 2021. In the two-speed market, Sydney’s housing values have been recording progressively larger monthly declines since February, while Melbourne has fallen across four of the past six months.
“There’s been significant speculation around the impact of rising interest rates on the property market and last month’s increase to the cash rate is only one factor causing growth in housing prices to slow or reverse,”
CoreLogic’s Research Director Tim Lawless said.
It means the giant price rise leaps that fuelled the property blues and home buyer anxiety for many people are probably at an end, with peak value having been reached or getting close in many regions.
Tim Lawless listed the factors as flowing through to lower housing demand:
Regional areas have, to some degree, bucked the trend of lower values due to “an ongoing imbalance between supply and demand”, says Tim Lawless. He says advertised stock levels remain “extraordinarily low” across regional Australia.
This is in contrast to more supply coming onto the market in Sydney and Melbourne.
Sydney’s advertised listings are 5.1% higher than a year ago and 1.5% above the five-year average. Similarly, Melbourne’s advertised stock levels are up 1.3% on last year and 8.1% above average based on the previous five years.
“With stock levels now higher than normal across Australia’s two largest cities, buyers are back in the driver’s seat,” Mr Lawless said.
However, home buyers could be cautious. Monthly sales volumes across Australia have generally been trending lower since November last year, says Eliza Owen, CoreLogic’s head of residential research.
“Property price falls may deter buyers who consider purchasing in a falling market more risky,” she says.
It seems sellers will have to find new ways to attract more buyers, and put a lot more thought into marketing the features home buyers find most appealing.
According to CoreLogic data, Sydney recorded the largest drop in estimated home sales, down -33.4% in the three months to May compared to the same period in 2021. Canberra (-21.6%) and Melbourne (-21.3%) also recorded significant reductions in activity.
Recent data from the Australian Bureau of Statistics also showed that in April borrowing for housing fell 6.4%. In the lead-up to the election, borrowing from owner-occupiers fell 7.3% in the month, and 4.8% for investors. NSW and Victoria saw the biggest pull-back in borrowing.
Put all this together and Tim Lawless concludes that as interest rates normalise over the next 12 to 18 months, the expectation is most of Australia’s capital cities will move into a period of decline brought about by less demand.
“With the RBA set to steadily raise the cash rate through the rest of the year and into 2023, we are likely to see falls in housing values become more widespread as mortgage rates trend higher,” he said.
Photo by David Pisnoy on Unsplash