Australian property values are seeing a slowdown in the monthly rate of growth.
This trend is expected to carry into 2022, as affordability constraints rise, mortgage rates bottom out, and a higher number of new listings takes some pressure off market conditions.
Since the monthly rate of growth in Australian dwellings peaked in March 2021 at 2.8 per cent (or the equivalent of about a $16,000 gain on the median Australian dwelling value), monthly increases have settled to 1.5 per cent (or a monthly increase of approximately $10,000).
The reduction in monthly increases is most prominent at the high end of the Australian dwelling market (or the 25 per cent of values, where dwellings values are around $1 million or more).S
Since peaking at 3.5 per cent in March, Australia’s high-end monthly changes in dwelling values has slowed to 1.5 per cent through October. The monthly growth across different value segments is shown in figure 2.
Monthly growth rate in housing values
The graph above shows the current upswing has seen greater volatility in the top 25 per cent of dwelling values, with relatively steady conditions across the low end of the market (the low end of the market is considered valuations at around $466,000 or less).
During the past 12 months, the highest value segment has seen the greatest level of gains (25.4 per cent), compared with 18.4 per cent across the middle of the market, and 16.7 per cent across the low end.
However, the volatility at the high end of the market, demonstrated by the rapid decline in growth rates, suggests the high end of the market can also expect a larger downturn in property values.
While growth rates are slowing at the national level, the October home value index results revealed some differences in momentum across the capital city markets.
Each capital city growth cycle is considered to the right and below, revealing that five of the eight capital city markets are seeing a slowdown in monthly growth rates.
Brisbane
Monthly growth rates across Brisbane dwellings seem to be re-accelerating.
Property values increased 2.5 per cent in the month of October, the highest monthly increase across the city through the current upswing, and the highest monthly increase since November 2003.
The Brisbane housing market has seen some extraordinary tailwinds through Covid, including strong interstate migration, normalised remote work and low exposure to the virus itself.
Years of relatively subdued growth rates have made typical dwelling values across the city appear affordable ($642,097 in October), at least relative to Melbourne ($780,303) and Sydney ($1,071,709).
Adelaide
Similar to Brisbane, the Adelaide housing market has seen its highest monthly increase since 2003, with capital gains of 2.0 per cent through October.
The momentum was led by a 2.2 per cent rise across houses, but even units saw an increase in monthly growth rates to 1.0 per cent through the month.
The Adelaide dwelling market has recently benefitted from a stronger interstate migration trend, relative affordability to other capital cities and a low level of available properties for sale, with total listings sitting -34.1 per cent below the five year average.
▲ Perth recorded the fastest slowdown in growth rates for property values, according to Corelogic.
Perth
The dwelling value change across Perth was -0.1 per cent over the month of October.
The virtually flat reading was down from a peak of 2.7 per cent through February 2021, making Perth the market with the fastest slowdown in growth rates.
This slowdown in momentum may be due to a few different factors, including extended state border closures, renewed affordability constraints for first home buyers and a recent uptick in new listings volumes.
Hobart
In Hobart, the monthly increase in dwelling values has slowed from 3.3 per cent in March 2021 to 2.0 per cent in October.
A 2.0 per cent growth rate is still very high, and is equivalent to a $13,274 increase to the median dwelling value over October.
Hobart’s persistently strong increases in value represent very strong demand, including from interstate buyers, against extremely tight levels of stock.
Corelogic counted just 660 properties for sale across Greater Hobart in the past four weeks.
Darwin
Due to the relatively small size of the market, monthly growth rates are volatile across Darwin dwellings.
Nonetheless, there does seem to be a trend of slowing increases. In the three months to October, monthly increases averaged 0.1 per cent, down from a peak monthly growth rate of 2.7 per cent over April.
Despite inching higher, Darwin dwelling values are still -15.0 per cent below the record high value reached in May 2014.
Canberra
Similarly to Hobart, the Canberra housing market has seen extraordinary levels of demand against low levels of available stock.
In what may be some reprieve for buyers, the monthly rate of increase has shown signs of slowing from the recent peak of 2.6 per cent in July 2021.
Since then, monthly increases in dwelling values across Canberra have slowed to 1.9 per cent.
It is important to keep in mind that while the rate of property value growth is continuing to slow nationally each month, even these reduced rates of increase are relatively high.
In fact, the decade average monthly movement in Australian home values is 0.4 per cent, far lower than the current ‘slowing’ rates of increase.
Through 2022, monthly growth rates are expected to continue declining.
This is due to a combination of factors, including a tighter credit environment, more normalised listings levels, and affordability constraints putting downward pressure on demand.
While a strong inflation reading for the September quarter has increased expectations of a tighter monetary environment as soon as 2022, recent statements from the reserve bank suggest an earlier-than-expected hike could be in 2023.
This will also be important to follow, given a higher cash rate and mortgage rates would likely put downward pressure on prices.
Article Source: www.theurbandeveloper.com
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