According to the CoreLogic December Hedonic Home Value Index results, national dwelling values slipped lower over the month, led by falls across Sydney, Darwin, Melbourne and Perth
The transition towards weaker housing market conditions has been clear but gradual and is likely to continue throughout 2018 according to CoreLogic head of research Tim Lawless.
Commenting on the results, Mr Lawless said, “From a macro perspective, late 2016 marked a peak in the pace of capital gains across Australia with national dwelling values rising at the rolling quarterly pace of 3.7% over the three months to November.”
“In 2017 we saw growth rates and transactional activity gradually lose steam, with national month-on-month capital gains slowing to 0% in October and November before turning negative in December.”
According to CoreLogic, the 0.3% fall in December was the catalyst for dragging the quarterly capital gains result into negative territory for the first time since the three months ending April 2016. Nationally, dwelling values were 4.2% higher over the 2017 calendar year which is a slower pace of growth relative to 2016 when national dwelling values rose 5.8% and in 2015 when values nationally were 9.2% higher.
Index results as at December 31, 2017
Across Australia, Mr Lawless confirmed that the shift to falling national dwelling values is being driven by the capital cities, with the combined capitals tracking half a percent lower over the December quarter, while across the combined regional areas of Australia, values were half a percent higher over the quarter.
Amongst the capitals, the weakest conditions are concentrated in Sydney and Darwin.
Mr Lawless said, “Sydney’s housing market has become the most significant drag on the headline growth figures.”
Sydney dwelling values were down 0.9% over the month to be 2.1% lower over the December quarter and 2.2% lower relative to their August 2017 peak. The city’s annual rate of growth is now tracking at just 3.1%; a stark difference to the recent cyclical peak when values were rising at the annual rate of 17.1% only seven months ago. Despite the reversal in growth rates since August 2017, Sydney dwelling values remain 70.8% higher than their cyclical low point in February 2012.
For Darwin, Mr Lawless believes the housing downturn is entrenched, with values trending lower since May 2014. The calendar year saw Darwin values down 6.5%. Since the 2014 peak, Darwin housing values have fallen by a cumulative 21.5%. While conditions for capital gains have been exceptionally weak across Darwin, rental prices are down by only 1.5% over the year. The substantial fall in values relative to rents has pushed Darwin rental yields to their highest level since July 2015 (5.9%) and Darwin rental yields are the highest of any capital city.