National dwelling values decline at a moderate pace
The recent CoreLogic report revealed that all is not doom and gloom when it comes to the property market. The national values may have slipped by 0.7% lower in November. The poor performance in Sydney and Melbourne led to a further decrease in the national dwelling value at –4.1% by the end of December.
As mentioned before in some of our previous posts, a property market crash is unlikely as the decreased in dwelling values across major cities has been happening at a moderate pace over the year.
According to the report, Sydney and Melbourne continued to experience an accelerated fall in dwelling values that were down to 4.2% since peaking in October last year. Sydney has continued to track lower with dwellings falling from 9.5% to 5.8% by the end of November 2018. Such numbers were last seen in
December 2016. The reason why there has been so much focus on these two capital cities is that they make up for 55% of the value of Australia’s housing asset class. Other capital cities are experiencing the opposite effect with dwelling values value trending higher 5 out of 8 cities, but this is all at a relatively slow pace.
Hobart and Canberra continue to lead the way in increased dwelling values
Investors and potential property buyers always need to remember that the Australian property market has different segments on a rotation that could be outperforming Melbourne and Sydney. For example, the regional market has continued to experience a gradual growth of 0.3% in dwelling values while combined capital cities slipped to –5.3% in annual dwelling values. Hobart and Canberra continue to stand out in terms of capital gain across the capital cities. Both capital cities have experienced value growth of up to 9.3% and 4.0% over the past 12 months.
The most expensive end of the market has experienced a downturn in dwelling values by 9.9% over the past 12 months across the top quartile of the market, while the affordable end of the spectrum continued to experience a rise of 1.7%. CoreLogic observed that this could be due to the housing affordability and improving economic conditions that have allowed for support in the housing demand.
Less investor activity leaves the property market in a bittersweet state
The fluence of investors on the property market plays an integral role to dwelling values, construction, and selling of property. However, with activity from investors decreasing gradually has affected the rental yields in Melbourne and Sydney. This has caused an imbalance between the capital cities rental values and dwelling values.
This has caused a domino effect for advertised listings to surge higher which may not be great for sellers in the market. The clearance rate has tracked lower at 40% with private treaty sakes taking a substantially longer time to sell which has led to larger rates of discounting when compared to previous years. This, in turn, has swung in favour for buyers, giving them an upper hand when it comes to negotiating prices.