According to the CoreLogic Home Value Index results for May, Australian dwelling values posted their first month-on-month decline since June last year. The national index was down 0.4% over the month, with five of the eight capital city regions recording a fall in values.
The reduction in values through May comes as transaction activity in the market shows more positive signs. The CoreLogic estimate of sales activity bounced back by 18.5% in May after a (revised) drop of 33% in April.
CoreLogic head of research, Tim Lawless, said “Considering the weak economic conditions associated with the pandemic, a fall of less than half a percent in housing values over the month shows the market has remained resilient to a material correction. With restrictive policies being progressively lifted or relaxed, the downwards trajectory of housing values could be milder than first expected.”
Across the state capitals, Melbourne’s housing market has posted the largest falls over the month, down 0.9% in May, following a 0.3% reduction in April. Values were also down over the month in Perth (-0.6%), Sydney (-0.4%), Brisbane (-0.1%) and Darwin (-1.6%), but rose in Adelaide (+0.4%), Hobart (+0.8%) and Canberra (+0.5%).
Regional markets have been more resilient to value falls, with the combined regional index holding firm through May.
Although some areas have avoided a reduction in values since March, every region has lost momentum and the longer term outlook remains uncertain. “Eventually government stimulus will wind back and borrower repayment holidays will expire. In the absence of these policies, housing values could come under some additional downwards pressure if economic conditions haven’t picked up towards the end of the year,” said Mr Lawless.
Although housing values are currently slipping or stabilising, recent history implies most home owners have some level of buffer that will help protect against negative equity. National home values remain 8.3% higher than they were a year ago, with Perth (-2.1%) and Darwin (-2.6%) the only capital cities where values remain lower than at the same time last year.
The high annual capital gain is mostly attributable to the earlier growth trajectory of housing values across Sydney (+14.3%) and Melbourne (+11.7%), with the remaining capitals showing a more sustainable history of price rises.