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Welcome to CoreLogic’s housing market update for October 2018. The Australian housing market continued to weaken over the month, with national dwelling values falling 0.5% in September, marking twelve months of consistently falling values across CoreLogic’s national hedonic home value index. Dwelling values tracked lower across five of the eight capital cities in September while five of the seven ‘rest of state’ regions recorded a fall in values over the month.Since the national index peaked twelve months ago, dwelling values have fallen by 2.7%; hardly a crash, and a slower rate of decline relative to the previous housing market downturn which ran between June 2010 and February 2012. National dwelling values fell by 3.0% over the first twelve months of this previous national downturn before declining 6.5% from peak to trough. While the housing market downturn is well entrenched across Darwin and Perth where dwelling values remain 22% and 13% lower relative to their 2014 peak, Sydney and Melbourne are now the primary drag on the national housing market performance. We’ve seen Sydney dwelling values drop 6.1% over the past twelve months and Melbourne values are 3.4% lower. Not only are these amongst the largest annual falls across the capital cities, but considering Sydney and Melbourne comprise approximately 60% of the national value of housing, the weak conditions in these cities have a substantial drag down effect on the overall national housing market performance. Regional markets, where housing values have generally been more resilient to falls than in the capital cities, are now showing more challenging conditions. Despite regional Western Australia being the only ‘rest of state’ region to record a decline in dwelling values over the past twelve months, the September quarter saw values dropping across the regional areas of New South Wales, Victoria, Queensland, and South Australia as well as regional WA.As housing market conditions have slowed and credit is less available, buyer numbers have thinned out. CoreLogic estimates of settled sales are down 10% year on year nationally, while previously strong markets such as Sydney and Melbourne have seen the number of settled sales fall more substantially, down 19% and 16% respectively.As the market moves through spring, new listing numbers have commenced their seasonal rise. Despite listing numbers starting to wind up, the number of freshly advertised properties remains well below previous years, reflecting a deterioration in vendor confidence. Although new listings are lower than previous years, the total number of properties available for sale has been climbing higher to be 9.5% higher than a year ago across the combined capital cities. The surge in total listing numbers is highest in Sydney and Melbourne where stock levels are now 22% and 17% higher than a year ago. The lift into total stock levels isn’t due to vendors dumping more stock on the market – this trend simply reflects a slower rate of absorption.More stock to choose from means buyers are generally more empowered and vendors are finding properties are taking longer to sell. Capital city dwellings are taking 53 days on average to sell – an increase of 11 days from a year ago. Vendors are having to discount their asking prices by a larger margin as well, with the initial asking price reducing by an average of 6.5% before selling. Housing market conditions are very different from city to city.Sydney is leading the national downturn, with dwelling values 6.1% lower over the past twelve months. Housing values have been falling consistently since July last year, with larger declines evident for house values, which are down 7.6% compared with a 2.6% fall in unit values. As the market slows, buyer activity has reduced by 18.5% over the past twelve months. With advertised stock levels 22% higher than a year ago and fewer buyers, the average selling time across Sydney has risen to 52 days compared with 37 days a year ago and auction clearance rates are consistently tracking around the high 40% to low 50% range.Melbourne’s housing downturn has gathered some pace over recent months, with dwelling values tracking 2.4% lower over the September quarter; that’s the largest decline over the quarter for any capital city and Melbourne’s largest fall over any three month period since January 2012. The weak conditions have been mostly confined to high value properties, with the top quartile of the market down 6.7% over the past twelve months, while property values across the lower quartile of the market are actually up 4.1% over the year. More recently values have started to trend lower across all of the broad valuation bands as Melbourne’s downturn becomes more broadly based.The Brisbane housing market remains in positive growth territory with dwelling values reaching a new record high in September. Despite the consistent capital gains, the pace of growth has slowed over the past twelve months. A year ago, dwelling values were rising at the annual pace of 2.9% and the rate of growth has since slowed to just 0.8% over the twelve months ending September 2018. House values and unit values have recorded a similar annual growth rate, however unit values remain 10.5% below their 2008 high. The previously weak conditions across the unit market were due to high supply levels across the inner city areas of the city. Adelaide’s housing market has remained reasonably steady with dwelling values unchanged over the September quarter and only 0.7% higher over the past twelve months. A year ago, dwelling values were rising at the annual rate of 5%, highlighting that despite the steady quarterly result, conditions have clearly slowed relative to a year ago. Despite the slower growth rates, homes are selling slightly faster than a year ago across Adelaide, implying a healthy balance between buyers and sellers. Adelaide is also the only capital city to record a year on year rise in settled sales, up 2.5%, signaling an improvement in buyer activity that has supported the faster average selling time. The Perth housing market saw values slip a little lower in September, down 0.6% over the month to be 2.8% lower over the year. Although values are still trending lower, many of the other metrics are now pointing in the right direction for Perth. The average selling time is gradually reducing, falling 73 days from 77 days a year earlier and vendors are discounting their asking prices by a lesser amount. Additionally, advertised stock levels are now well below their 2016 highs. A reduction in available housing stock is another sign that buyers and sellers are becoming more evenly balanced as Perth housing prices find a floor. The Hobart housing market remains the best performing capital city over the past twelve months, with dwelling values up 9.3%. The annual growth rate is far higher than any other capital city, however recent months haven’t been as strong, with Hobart dwelling values slipping lower over two of the past three months. Homes are taking 10 days longer to sell relative to last year and vendor discounting has trended higher as well. Despite the easing in housing market conditions, advertised stock levels remain tight and rental yields are amongst the highest of any capital city. The annual rate of decline has continued to ease across Darwin. The past twelve months has seen top end dwelling values reduce by 3.7% to be 22.1% lower than their 2014 peak. Although values are down on an annual basis, the September quarter saw the market stabilise, with values up 0.1%. The improvement in conditions is due to a better performance across the detached housing sector, while unit values have continued to fall, down 1.5% over the quarter and 15% lower over the year.Canberra housing market conditions have lost some steam over the year, however dwelling values remained at a record high in September, rising 1% over the quarter to be 2% higher over the past twelve months. The annual rise is attributable to stronger conditions across the detached housing sector where values rose 3.1% over the year, helping to offset a 1.4% drop in unit values. The housing market has slowed virtually in line with heighted levels of regulation across the finance sector and subsequently, tighter lending practices and a sharp reduction in investment. With the release of the royal banking commission interim report, there is a chance that already tight credit conditions could tighten even further. The latest credit aggregates from the Reserve Bank show housing credit growth tracking at the lowest level in almost five years and investor related credit is growing at the slowest pace on record. If credit conditions tighten further, we can expect housing market activity to follow suit. CoreLogic estimates on national settled sales activity is already down 10.0% year on year.While credit availability is a key factor in the slowdown, other factors are also dampening housing market conditions. Investors, who still comprise 41% of the value of new mortgage demand, continue to face higher mortgage rates and stricter servicing criteria, as well as low rental yields and weak capital gain prospects. Changes to taxation policies related to housing, if we see a change of government at the next federal election, could also weigh on investor sentiment. Changes to demand side factors are also evident. Nationally, the rate of net overseas migration was down almost 9% over the twelve months to March 2018, which is detracting from housing demand. The slowdown is being most felt in New South Wales with a reduction of 13,100 net overseas migrants over the twelve-month period. Interstate migration trends are also having an impact on housing demand. In NSW, the rate of net interstate migration outflow is the highest since March 2009 and net interstate migration into Victoria has been easing since reaching a peak in March 2017. The net result of fewer overseas migrants and less interstate migration is the lowest annual rate of population growth in these states since 2015.The primary beneficiary from interstate migration fueled housing demand is Queensland, where the number of residents moving from other states is at the highest level since 2007.Against a slowdown in housing demand is higher levels of housing supply. A record high number of dwellings are under construction across Victoria and South Australia, while residential dwelling construction is only slightly off a record high in New South Wales. With such a substantial pipeline of housing stock in the wings at a time when credit has become less available, investment and foreign buying activity has fallen materially and population growth is trending lower, this could create some headwinds for the market. There may be some challenges in absorbing newly built housing stock, especially those dwellings targeted specifically towards investors.While the housing risk profile is heightened, economic conditions remain healthy and mortgage rates are set to remain low into 2020. Labour markets have strengthened with solid jobs growth, unemployment is continuing to trend lower and under-employment recently reached the lowest level since 2014. If labour market conditions remain firm, we could see wages growth continue to trend higher from a record low base, supporting further improvements in housing affordability and debt reduction. Although mortgage rates edged higher in September, the cost of housing debt remains at levels not seen since the 1960’s. Low mortgage rates should help to support housing demand and keep a floor under housing prices. With dwelling values recording modest falls, or growth rates slowing, housing affordability is improving which should see first home buyers become more active in the housing market, helping to offset the reduction in investment activity.As the market moves through spring, we are likely to see heighted stock levels, providing more choice for buyers. Buyers are back in the driver’s seat, with plenty of stock to choose from, little in the way of urgency and plenty of leverage at the negotiation table. Vendors will need to be realistic about their pricing expectations and ensure they are marketing their property as best as possible to attract the deepest pool of buyers. With so much uncertainty in the market, it’s even more important than normal to stay up to date with housing market conditions, as well as the key drivers and challenges impacting the trends. You can access all our latest research and statistics at .au.Short VersionWelcome to CoreLogic’s housing market update for October 2018. The Australian housing market continued to weaken over the month, with national dwelling values falling 0.5% in September, marking twelve months of consistently falling values across CoreLogic’s national hedonic home value index. Dwelling values tracked lower across five of the eight capital cities in September while five of the seven ‘rest of state’ regions recorded a fall in values over the month.Since the national index peaked twelve months ago, dwelling values have fallen by 2.7%; hardly a crash, and a slower rate of decline relative to the previous housing market downturn which ran between June 2010 and February 2012. National dwelling values fell by 3.0% over the first twelve months of this previous national downturn before declining 6.5% from peak to trough. While the housing market downturn is well entrenched across Darwin and Perth where dwelling values remain 22% and 13% lower relative to their 2014 peak, Sydney and Melbourne are now the primary drag on the national housing market performance. We’ve seen Sydney dwelling values drop 6.1% over the past twelve months and Melbourne values are 3.4% lower. Not only are these amongst the largest annual falls across the capital cities, but considering Sydney and Melbourne comprise approximately 60% of the national value of housing, the weak conditions in these cities have a substantial drag down effect on the overall national housing market performance. Although dwelling values are still rising on an annual basis in Brisbane, Adelaide, Hobart and Canberra, the rate of capital gain has slowed noticeably in these regions. One year ago, the annual gain in Brisbane was tracking at 2.9% and has since slowed to just 0.8% over the past twelve months. Adelaide values were rising at the annual rate of 5.0% a year ago, slowing to 0.7%, while the annual growth rate has slowed from 14.3% in Hobart to 9.3% and Canberra has seen annual gains slide from 7.8% to 2.0%. The only capitals to see an improvement in the annual change in housing values were Perth and Darwin where the annual rate of decline has eased off.Regional markets, where housing values have generally been more resilient to falls than in the capital cities, are now showing more challenging conditions. Despite regional Western Australia being the only ‘rest of state’ region to record a decline in dwelling values over the past twelve months, the September quarter saw values dropping across the regional areas of New South Wales, Victoria, Queensland, and South Australia as well as regional WA.As housing market conditions have slowed and credit is less available, buyer numbers have thinned out. CoreLogic estimates of settled sales are down 10% year on year nationally, while previously strong markets such as Sydney and Melbourne have seen the number of settled sales fall more substantially, down 19% and 16% respectively.As the market moves through spring, new listing numbers have commenced their seasonal rise. Despite listing numbers starting to wind up, the number of freshly advertised properties remains well below previous years, reflecting a deterioration in vendor confidence. Although new listings are lower than previous years, the total number of properties available for sale has been climbing higher to be 9.5% higher than a year ago across the combined capital cities. The surge in total listing numbers is highest in Sydney and Melbourne where stock levels are now 22% and 17% higher than a year ago. The lift into total stock levels isn’t due to vendors dumping more stock on the market – this trend simply reflects a slower rate of absorption.More stock to choose from means buyers are generally more empowered and vendors are finding properties are taking longer to sell. Capital city dwellings are taking 53 days on average to sell – an increase of 11 days from a year ago. Vendors are having to discount their asking prices by a larger margin as well, with the initial asking price reducing by an average of 6.5% before selling. The housing market has slowed virtually in line with heighted levels of regulation across the finance sector and subsequently, tighter lending practices and a sharp reduction in investment. With the release of the royal banking commission interim report, there is a chance that already tight credit conditions could tighten even further. The latest credit aggregates from the Reserve Bank show housing credit growth tracking at the lowest level in almost five years and investor related credit is growing at the slowest pace on record. If credit conditions tighten further, we can expect housing market activity to follow suit. CoreLogic estimates on national settled sales activity is already down 10.0% year on year.While the housing risk profile is heightened, economic conditions remain healthy and mortgage rates are set to remain low into 2020. Labour markets have strengthened with solid jobs growth, unemployment is continuing to trend lower and under-employment recently reached the lowest level since 2014. If labour market conditions remain firm, we could see wages growth continue to trend higher from a record low base, supporting further improvements in housing affordability and debt reduction. Although mortgage rates edged higher in September, the cost of housing debt remains at levels not seen since the 1960’s. Low mortgage rates should help to support housing demand and keep a floor under housing prices. With dwelling values recording modest falls, or growth rates slowing, housing affordability is improving which should see first home buyers become more active in the housing market, helping to offset the reduction in investment activity.As the market moves through spring, we are likely to see heighted stock levels, providing more choice for buyers. Buyers are back in the driver’s seat, with plenty of stock to choose from, little in the way of urgency and plenty of leverage at the negotiation table. Vendors will need to be realistic about their pricing expectations and ensure they are marketing their property as best as possible to attract the deepest pool of buyers. With so much uncertainty in the market, it’s even more important than normal to stay up to date with housing market conditions, as well as the key drivers and challenges impacting the trends. You can access all our latest research and statistics at .au. ................
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