House Prices Down but Measured
Australian house prices continue to fall due to the prolonged economic impact of the COVID-19 pandemic. The slow and measured decline can be seen across the country, with Canberra and Adelaide the only capitals to experience positive growth over the last month. According to figures from Core Logic, national dwelling values were down -0.6% in July, with -1.6% growth recorded over the quarter for annual growth of 7.1%. While this is far from the sharp drop predicted by many experts, we are likely to see further measured declines in the months ahead.
In the CoreLogic Homes Values Index from July 2020, Melbourne dwelling values had the worst result at -1.2% for the month. Sydney recorded -0.9%, followed by Perth at -0.6%, Brisbane at -0.4%, Darwin at -0.3%, and Hobart at -0.2%. Adelaide and Canberra were the only state capitals to record positive growth for the month at 0.1% and 0.6% respectively. Combined capital city growth was -0.8%, and combined regional growth was flat at 0.0%.
The situation for the quarter was not much better, with only Canberra, Hobart, and Adelaide managing to record positive growth and national figures reaching -1.6%. Sydney and Melbourne are both performing well when analysed on an annual basis, however, with 12.1% and 8.7% growth respectively for the year ending July. Darwin and Perth were the only two capitals to record negative growth over 12 months at -2.2% and -2.5% respectively. The median national dwelling value now sits at $552,912, with Sydney leading the way with $866,110, and Melbourne at $678,334.
According to CoreLogic’s head of research Tim Lawless, COVID-19 has had a negative but measured impact on Australian housing market so far: “The impact from COVID-19 on housing values has been orderly to-date, with CoreLogic’s national index falling only 1.6 per cent since the recent high in April and housing turnover has recovered quickly after it’s sharp fall in late March and April."
There are many reasons for this relative optimism, with the wider economic environment supporting house price growth despite record levels of unemployment and slow business activity. According to Mr Lawless, “Record low interest rates, government support and loan repayment holidays for distressed borrowers have helped to insulate the housing market from a more significant downturn." The combination of recent support and long-term momentum seems to be controlling the rate of the drop, with clearance rates up as data points towards a measured market decline.
The long-term state of the Australian housing market is also favourable, with growth over the last few years likely to influence price stability as we emerge from the pandemic. "Advertised supply levels have remained tight, with the total number of properties for sale falling a further 4.3 per cent in the four weeks to July 27th, sitting 15.2 per cent below where they were this time last year." said Mr Lawless, adding “Additionally, increased demand driven by housing specific incentives from both federal and state governments, especially for first home buyers, have become more substantial.”