Brisbane and Adelaide remained on a solid trajectory in price growth compared to other capitals in November.
CoreLogic’s latest Hedonic Home Value Index showed that both Brisbane and Adelaide were the only capitals to see a drop in prices.
In fact, the monthly growth of both cities reached a new cyclical high in the month, with Brisbane reaching 2.9% (highest in October 2003) and Adelaide 2.5% (highest since February 1993).
These gains translate into a monthly increase of approximately $18,500 in Brisbane and $13,500 in Adelaide.
Tim Lawless, Research Director of CoreLogic, said capital cities are now showing greater diversity, with Brisbane and Adelaide now leading the way, while conditions in Sydney and Melbourne slowed more sharply.
“Sydney and Melbourne have seen demand more heavily impacted by affordability pressures and negative migration from both an interstate and foreign perspective,” he said.
The divergence can also be seen in the supply dynamics in these capitals.
In the four weeks to 28 November, total housing supply in Adelaide was 32% lower than the five-year average and 33.9% lower in Brisbane.
On the other hand, the housing stock in Sydney and Melbourne has ‘normalised’, with housing only 2.6% below the five-year average in the former and above 7.9% in the latter.
While house prices continued to rise, the overall growth of 1.3% in November was the weakest since January, when values rose by 0.9%.
“Virtually every factor that has pushed home prices up has lost some of its momentum in recent months,” Lawless said.
“Fixed mortgage rates are rising, higher offers take away some urgency from buyers, affordability has become a greater barrier to entry and credit is less available.”
The residential segment continued to outpace the residential segment in terms of price growth in November.
However, the gap is narrowing: the total home value increases by 1.2%, while the unit value increases by 0.7%.
Meanwhile, houses in the capital are now 37.9% more expensive than apartments in the capital, the biggest difference ever.
This gap means that, on average, a metropolitan home costs about $240,500 more than a capital city.
In Sydney, the gap is wider, with homes costing an average of $523,000 more than a unit.
“With such a large value gap between broad home types, it’s no wonder we’re seeing demand gradually move toward higher-density homes simply because they’re significantly more affordable than buying a home,” said Mr. Lawless.
Another interesting trend is the less obvious slowdown in regional areas, where the monthly pace of capital gains has continued to accelerate over the past three months.
In regional Australia, the coastal and lifestyle markets with NSW’s Southern Highlands and Shoalhaven performed best, with the highest quarterly growth of 9.7%, followed by Hunter Valley at 8.9%, and Tasmania and Launceston and the Northeast region with 7.7%.
Outlook remains positive despite concerns
Although growth in most Australian housing markets has slowed since April, the outlook remained positive.
However, it seems that most of the factors that have pushed house prices soar have already passed.
“Further increases in available supply should help draw more heat from the market as buyers have more choice and less urgency,” Lawless said.
The era of ultra-low rates is also coming to an end as fixed rates rise.
However, buyers can take solace in the fact that variable rates are less likely to rise unless official spot rates are raised, which is expected to take more than a year.
There are also expectations of a tighter credit policy, which could further slow down housing activity.
Still, there are headwinds expected to support housing in the near term, including low debt levels and the imminent resumption of interstate and overseas migration.
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