After recording an easing in the growth trend since March 2021 (2.8%), CoreLogic’s national home index recorded its first month of negative dwelling value growth in 20 months, falling -0.1% across both property types.

This fall in values came amid lower consumer sentiment, increasing global uncertainty, mounting inflationary pressure, and the first cash rate rise since November 2010, up 25 basis points in May.

Analytics

At one decimal place both houses and units recorded a -0.1% fall in values over May, however taking the result to two decimal places, house values saw a larger monthly decline compared to units, falling – 0.15% and -0.08% respectively.

This saw the quarterly and annual trends in house and unit values continue to weaken, to 1.3% for houses and 0.5% for units over the three months to May, and to 15.6% and 8.7% over the past year respectively.

May’s result saw the annual performance gap between national houses and units fall to its lowest level since April 2021 (6.2%), at just 7.0 percentage points.

Fig01

The combined capitals unit market fell -0.2%, its first monthly decline in values since October 2020, while regional unit values showed some resilience rising 0.8% over the month.

Monthly declines across Sydney (-0.7%) and Melbourne unit values (-0.3%) weighed heavily on the combined capitals and national results, collectively making up 71.4% and 55.8% of unit markets respectively.

Since peaking in November 2021, Sydney unit values have recorded progressively larger monthly declines, while Melbourne units depreciated -0.1% over the year to date.

While last month’s rate rise likely added further downward pressure to the Sydney and Melbourne unit markets, growth conditions have been weakening over the past year amid worsening affordability, lower consumer sentiment, and rising fixed mortgage rates.

Fig02

More recently we have also seen surging inflation and a more cautious lending environment also dampening housing demand.

Some of the smaller unit markets also saw values fall in May.

Values across Darwin, Regional Victoria and Regional WA fell -0.2%, -0.4% and – 0.5% over May respectively.

Outside of these markets, growth in unit values remained positive, however, previously strong markets are now showing signs of a slowdown.

Fig03

Across Queensland, the pace of quarterly value growth has eased from its recent cyclical peak recorded over the three months to April, down 30 basis points in Brisbane (4.3%) and down 1.2 percentage points across regional Queensland (5.1%).

Despite recording positive monthly growth in May, the quarterly growth trend eased further across Canberra, regional NSW, and regional SA.

Adelaide is the exception to the slowdown in growth, with unit values rising 1.2% over May and recording a new cyclical peak in quarterly growth over the three months to May (4.5%).

At the other end of the spectrum, some unit markets, including Hobart (2.0%) and Regional Tasmania (5.4%), which recorded a slowdown in growth over the second half of last year are now seeing their quarterly trend re-accelerate.

Fig04

Across the combined capitals, newly advertised unit listings have trended above average throughout the first half of the year, resulting in total listing levels rising from -5.5% below the 5-year average over the 4 weeks to 23rd January to -0.6% below the average over the 4 weeks to 29th May.

While Advertised supply levels have normalised across the combined capitals, listings stock remains diverse amongst the individual capitals.

While newly advertised unit listings are now trending above average in Brisbane (21.2%) and have started to normalise across Adelaide (-2.2%), the total advertised stock remains well below the previous 5-year average for these markets (-39.1% and -45.0% respectively).

Strong demand across these markets is seeing new listings being absorbed at a faster pace than they are being added, helping to insulate these markets from tougher selling conditions.

Over the three months to May, Brisbane recorded 1.3 sales for every freshly advertised unit, while Adelaide reported a sales-to-new listing ratio of 1.6.



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