Perth recorded its first monthly decline in home values as the general growth trend in Australian housing markets continued to slow down in October.
For the first time since June last year, the Western Australian capital reported its first monthly decline in October of 0.11%, according to CoreLogic’s latest Hedonic Home Value Index.
Overall, home values in Australia – including for homes and units – grew 1.49% over the month, slightly lower than the growth achieved in the previous two months.
Brisbane posted the biggest gain in the month at 2.54%, followed by Adelaide and Hobart at 2%.
It is worth noting that gains in Melbourne dipped below 1% over the month, reaching 0.99%.
Regional markets continued to outperform capital cities in terms of price gains, with the former clocking in at 1.87% versus the latter’s 1.38%.
Easing of price gains
Tim Lawless, research director at CoreLogic, said three things are currently driving price movements: worsening housing affordability, rising supply levels and less stimulus in the form of government support.
“House prices continue to outpace wages by a ratio of about 12:1. This is one of the reasons first home buyers are becoming an increasingly smaller part of housing demand,” he said.
As demand continued to decline, new quotes rose in the month, up 47% from the recent low in September.
On the support front, housing-focused incentives like HomeBuilder and stamp duty concessions have already expired.
“Combining these factors with the subtle tightening of credit ratings for November 1, it is very likely that the housing market will gradually lose momentum,” he said.
Despite the moderation in monthly gains, annual growth has remained robust throughout the year so far.
Over the year to October, house prices rose 21.6% with most capitals reporting gains of over 20%.
Single markets will become popular
Units continued to be inferior to houses in price gains – this was most evident year on year.
For example, houses in Sydney achieved an annual increase in value of 30.4% compared to a 13.6% increase in units.
The trend was also visible in Melbourne, where house prices rose by 19.5%, while unit prices rose only 9.2%.
Mr Lawless said this trend was less evident in regional areas of Australia where the performance gap between homes and units is relatively small.
“As homes become less affordable, we expect more demand to be diverted to the higher-density sectors of the market, especially in Sydney, where the gap between the average home and unit value is now close to $500,000,” he said.
“As investors become a bigger part of financing new housing, we may see increased demand for medium to high density housing.”
“Investor demand across the unit sector could be bolstered as overseas borders open, which is likely to have a positive impact on rental demand, especially in the inner-city unit areas.”
Photo by Nathan Hurst on Unsplash.
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