We sum up how the housing market performed during 2017.

In summing up the 2017 housing market, CoreLogic research analyst Cameron Kusher described it as a market in transition but still quite diverse and where we continued to see dwelling values rise over the 12 months to November 2017. Albeit, with a slowing growth trend throughout the year; towards the end of this year, we saw a levelling out of national dwelling values.

The sharpest transition occurred in Sydney which was previously the strongest housing market over recent years. Sydney dwelling values were -1.3% lower than their August 2017 peak at the end of November. Most other capital cities have also seen their rates of growth slow recently with Perth the exception. Although Perth dwelling values are lower over the year, there has been a subtle transition towards growth in late 2017 with values 0.3% higher over the three months ending November 2017; the strongest rate of quarterly growth since June 2014.

The diversity of the market was most evident in the double-digit values rise over the past 12 months in Hobart (+11.5%) and Melbourne (+10.1%) while values continued to fall over the year in Perth (-2.6%) and Darwin (-5.5%). Although the heat is now clearly coming out of the housing market, Sydney and Adelaide are the only capital cities to see the annual change in dwelling values now lower in November 2017 relative to November 2016.

The transition has been largely driven by significant shifts in the lending environment; credit growth limits for investors were already in place however, origination limits were introduced for interest-only mortgages at the end of March ‘17. As a result of these changed regulatory policies, lenders have begun to charge premiums on the interest rate for investor and interest-only mortgage products. Recall that investors have been the key driver of mortgage demand in NSW and a substantial source of demand in Vic.

Throughout 2018, we’re expecting to see:

  • A further slowdown in national housing market conditions.
  • Credit policies likely to remain tight as regulators keep a watchful eye out for a rebound in investment credit growth or, a reversal in the trend towards fewer mortgages with a loan to valuation ratio of more than 80%.
  • Interest rates are likely to remain on hold in 2018. Higher interest rates would stifle household consumption and business investment and could cause financial distress amongst a highly indebted household sector, however rates aren’t likely to fall due to concerns of refueling the controlled slowdown in the housing market.
  • National dwelling values will fall further in 2018, driven lower by falls across Sydney and to a lesser extent, Melbourne. After values surged 75% higher over Sydney’s growth cycle and 59% higher across Melbourne, it’s rational to expect some slippage in dwelling values across these cities.

Previous downturns have seen the annual number of sales fall by around 20-25% from peak to trough; considering the cyclical peak in transactional activity occurred over the twelve months ending August 2015, year on year transactional activity is already 13.2%lower than the most recent peak.

While our outlook for 2018 may not be as positive as it was in 2017, there are plenty of factors that will work to keep a floor under housing demand. We’re likely to see regulators and policy makers looking to encourage households with high levels of debt to reduce their exposure while rates remain low. Why? Because currently, household debt levels are at record highs, a factor which has been called out by the Reserve Bank repeatedly, as well as international institutions such as the OECD, BIS and IMF. With interest rates remaining low, the opportunity for households to pay down debt could come at the expense of broader spending on retail and discretionary items.

The below table indicates the top performing suburbs nationally and across the capital cities over the 12 months to November 2017.


Specifically the analysis looks at:

  • Highest median value
  • Lowest median value
  • Lowest median value within 10km of a capital city
  • Highest gross rental yield
  • Highest gross rental yield within 10km of a capital city
  • Greatest 12 month change in median values
  • Greatest 5 year change in median values
  • Highest median weekly advertised rent
  • Lowest median weekly advertised rent
  • Highest gross value of sales (12 months to September 17)

Cameron Kusher comments:

Previous downturns have seen the annual number of sales fall by around 20-25% from peak to trough; considering the cyclical peak in transactional activity occurred over the twelve months ending August 2015, year on year transactional activity is already 13.2% lower than the most recent peak.

While our outlook for 2018 may not be as positive as it was in 2017, there are plenty of factors that will work to keep a floor under housing demand. We’re likely to see regulators and policy makers looking to encourage households with high levels of debt to reduce their exposure while rates remain low. Why? Because currently, household debt levels are at record highs, a factor which has been called out by the Reserve Bank repeatedly, as well as international institutions such as the OECD, BIS and IMF. With interest rates remaining low, the opportunity for households to pay down debt could come at the expense of broader spending on retail and discretionary items.