The May CoreLogic home value index results out today confirm that national dwelling values dipped by 0.1%  over the month, fueled by weaker conditions in Melbourne and Sydney while regional dwelling values continued  to tick higher.

Australian dwelling values slipped 0.1% lower in May,  taking the annual change (-0.4%) into negative territory for  the first time since October 2012. In a sign the housing  market downturn is becoming more entrenched, May marked  the eighth consecutive month-on-month fall since the national market peaked in September last year, taking the cumulative  fall in dwelling values to 1.1% through to the end of May 2018.  Similar to the current softening in housing market conditions,  the previous downturn, which ran briefly from late 2015 to early  2016, was also driven by tighter credit conditions. It lasted for  only five months nationally, with national dwelling values falling  by 97 basis points before surging higher again on the back of two 25 basis point cuts to the cash rate which led to a rebound  in housing credit growth.

Index results as at May 31, 2018

Index results as at May 31, 2018

Commenting on the May results, CoreLogic head of research  Tim Lawless said, “The negative headline growth rate is a  symptom of weakening housing conditions across the capital  cities, led by Melbourne and Sydney where previously, capital  gains were nation-leading. Sydney and Melbourne comprise  approximately 60% of Australia’s housing market by value, and  40% by number, so the performance of these two cities has a  larger effect on the headline market performance.”

Dwelling values continue to rise across the regional  markets “The combined regional markets have helped to  offset a broader decline, with dwelling values consistently  rising, albeit at a much lower pace relative to the growth seen in  Sydney and Melbourne over the previous growth phase.  

Dwelling values outside of the capital cities nudged 0.2% higher  over the month to reach a new record high in May.”

Melbourne has taken over from Sydney as the weakest  performing housing market over the past three months  Drilling down across the individual capitals shows Melbourne  has taken over from Sydney as the weakest housing market,  recording a 0.5% fall in values over the month to be 1.2% lower  over the three months ending May. This is the largest decline in  Melbourne dwelling values over a three month period since  February 2012. Melbourne’s housing market was previously  looking more resilient to value falls relative to Sydney. Recently  however, auction clearance rates have been deteriorating,  inventory levels are rising and transaction activity is tracking  12.9% lower than one year ago.

Dwelling values slipped lower over the month across five  of Australia’s eight capital cities. Apart from Melbourne,  dwelling values recorded a month-on-month fall in Sydney (-  0.2%), Perth (-0.1%), Darwin (-0.2%) and Canberra (-0.1%),  however, Sydney was the only capital city other than  Melbourne to record a decline in dwelling values over the past  three months, with a 0.9% fall.

Hobart’s impressive run of capital gains continued and is  showing little signs of slowing down with dwelling values  jumping 0.8% over the month to be 3.7% higher over the rolling  quarter and 12.7% higher year-on-year.