According to the CoreLogic Home Value Index results out today, Australian housing values have not seen any evidence of a material decline in April, despite a sharp drop in market activity and a severe weakening in consumer sentiment. Although most regions recorded a rise in home values through April, the national monthly pace of growth more than halved, dropping from 0.7% in March to 0.3%. The April result was the smallest month on month movement since June last year, when the national index was down 0.2%.
CoreLogic head of research Tim Lawless said, “Although housing values were generally slightly positive over the month, the trend has clearly weakened since mid-to-late March, when social distancing policies were implemented and consumer sentiment started to plummet.”
The capital city markets generally showed a weaker performance relative to the regional markets, with the combined capital cities index up 0.2% in April compared with a 0.5% rise across the combined regional markets.
The sharpest reversal in growth conditions can be seen in Melbourne, where values nudged into negative territory through April, down 0.3%. Sydney values remained positive, rising 0.4% over the month. To provide some context, the six months prior to March saw both cities averaging a monthly growth rate around 1.7%.
According to Mr Lawless, Australia’s largest cities have a higher level of downside risk. “Sydney and Melbourne arguably show a higher risk profile relative to other markets due to their large exposure to overseas migration as a source of housing demand, along with greater exposure to the downturn in foreign students, stretched housing affordability and already low rental yields that are likely to reduce further on the back of rising vacancy rates and lower rents.”
Hobart was the only other major region to record a decline in home values over the month, down 0.1%. Explaining the drop in Hobart values, Mr Lawless said, “Hobart has the most exposure of any capital city, at least proportionally, to the industry sectors most heavily impacted by COVID-19 in terms of employment, with 12.7% of the workforce employed within accommodation & food services, and arts & recreation services sectors.”
Despite the weakening in housing market conditions, some cities have outperformed the six-month average pace of change. Perth (+0.2%), Adelaide (+0.4%) and Darwin (+1.7%) outperformed their six month average pace of growth in April, demonstrating some resilience to weaker conditions.