CoreLogic’s stratified hedonic home value index shows the most expensive sector of the market is slowing rapidly as has been the case in other recent housing market slowdowns.
The stratified hedonic index measures the change in values across three broad value based segments of the housing market: the most affordable 25% of properties, the middle 50% of properties and the most expensive 25% of properties. The Index provides valuable insight into how different segments of the market are performing.
Over the March 2018 quarter, national data shows that dwelling values were down by 0.5%, however digging below the surface reveals the modest fall in values was confined to the most expensive quarter of the market. The most affordable properties increased in value by +0.7% compared to a +0.3% increase across the middle market and a -1.1% decline across the most expensive properties. Over the past year, dwelling values within the least expensive quartile increased by +0.7%, middle 50% values were +2.7% higher and top 25% values were +0.1% higher. With value growth slowing, the trends of the past are being repeated with the most expensive properties experiencing the most rapid slowdown in value growth. During the growth phase, it was these same properties that were also recording the highest rate of capital gain.
Of course trends vary substantially across the country.
Over the past 12 months, the most expensive properties have recorded the largest value falls (-5.7%) followed by the middle market (-0.9%) and the most affordable market managed some moderate growth (+0.6%).
The trends were somewhat different outside of Sydney, with the strongest annual growth recorded in the middle 50% (+5.6%), followed by the low 25% (+4.1%) and top 25% (+3.7%).
Values have increased over the past year across each segment of the market, with the most moderate increases recorded across the most expensive segment (+1.6%), then the middle 50% (+6.2%) while the most affordable suburbs have recorded double-digit growth (+11.3%).
Outside of Melbourne, the most expensive suburbs have recorded the strongest value growth (+4.7%) followed by the middle suburbs (+3.2%) and finally the most affordable suburbs where values were +2.4% higher.
Annual growth has been quite moderate however, the middle valued suburbs recorded the strongest growth (+1.1%) followed by fairly similar growth rates across the most affordable suburbs (+0.9%) and the most expensive suburbs (+0.8%).
The most expensive suburbs were the only ones in which values increased over the past year (+2.4%), with values lower over the middle (-0.8%) and affordable (-3.5%) market segments.
Each sector of the market recorded growth over the past year with the greatest increase across the middle market (+1.5%) with the affordable and expensive segments each recording growth of +0.8%.
Values have declined across each market segment over the past year with the biggest falls across the most expensive suburbs (-4.2%) followed by the middle market (-1.2%) and the most affordable market (-0.2%).
Values have fallen over the past year across each market sector with the largest declines across the most affordable properties (-4.4%) followed by the middle market (-3.2%) with the most expensive properties recording the most moderate value falls (-2.4%).
The most expensive regional properties have recorded the most moderate value falls over the past year (-3.8%) while the middle (-6.4%) and least expensive (-7.5%) market segments have experienced much greater value falls.
The strongest performing market for value growth has recorded value increases across each segment, the greatest of which has occurred across the most affordable properties (+13.9%) followed by the middle market (+11.6%) and the most expensive market (+10.5%).
Values are climbing across each segment with the greatest annual growth recorded across the most affordable segment (+8.1%) followed by the middle market (+5.5%) and finally the most expensive properties (+2.7%).
The city has experience substantial value falls over the past year, the largest of which have occurred for the most expensive properties (-9.0%) followed by the middle market (-8.2%) and the most affordable suburbs (-6.8%).
Values have increased over the past 12 months for the most affordable properties (+2.9%) while they have fallen across both the middle (-0.6%) and the most expensive properties (-0.7%).
The most affordable suburbs have recorded the slowest annual growth over the past year (+1.7%) followed by the most expensive properties (+1.9%) and the middle market (+2.6%).
The data highlights, that particularly within the housing markets which have recorded the strongest value growth over recent years (Sydney and Melbourne) that growth across the premium housing sector is slowing more rapidly than the other sectors. This mirrors the experience in other recent housing market slowdowns/downturns whereby it is the most expensive suburbs which slow first and have experienced the larger downturns.
Hobart and regional Tasmania are seeing values grow at a rapid pace and it is interesting to note that the growth in the market is being led by more affordable properties with the relatively expensive housing lagging in terms of growth.
In Perth and Darwin where the housing markets have been in a downturn for many years different trends are emerging. Perth is showing more signs of a recovery than Darwin and it appears the improvement in Perth is being driven by premium housing. By comparison, in Darwin where the market shows few signs of improvement the most expensive properties are showing the greatest weakness.
The headline figures tell a broad story about the housing markets performance while the stratified hedonic index highlights the importance of also taking a more micro look at the market. The data shows that even within cities there are very different trends at play between the affordable and expensive properties which is important to understand.