Housing values fell last financial year - what happened?

Australia’s housing markets have slowed over the past financial year, according to CoreLogic, with most capital cities experiencing downturns and most regional areas experiencing relatively sluggish growth.

The difference between the downturn experienced over the 2017-18 financial year and other housing downturns over the past 20 years is that the latest slowdown in value growth was not precipitated through movements in the cash rate, according to CoreLogic:

“Independent increases to the cost of borrowing, particularly for investors, tighter credit conditions and a lack of real wage growth which has led to reduced affordability are some of the main drivers of the weakening housing conditions.” – Cameron Kusher, CoreLogic

Australia’s dwelling values – the big picture

Nationally, CoreLogic found that dwelling values fell by -0.8% over the past financial year, the biggest drop since the -0.3% fall in 2011-12. The recent fall is a stark contrast to the 10.2% increase in values nationally over the previous 2016-17 financial year.

These national figures were found to be primarily driven by falling dwelling values in the capitals. 2017-18 was found to be one of only four financial years over the past two decades in which capital city values have fallen, with its -1.6% drop being the largest fall since the -0.3% fall in 2011-12.

The combined regions were found to have grown their dwelling value by 2.2% over the financial year, however this was a much slower rate of growth than the 6.4% the year before – the slowest since 2012-13 when values increased by just 0.9%.

What happened last financial year?

According to CoreLogic, in the 2017-18 financial year:

• Sydney saw its largest fall in property values (-4.5%) in 20 years.
• Regional NSW saw the slowest housing value growth since 2012-13 (+3.2%).
• Melbourne values grew for the sixth consecutive year, though at the slowest rate out of any of those years (+1.0%).
• Regional Victoria’s markets accelerated, experiencing the greatest increase in values since 2010-2011 (+5.0%).
• Brisbane also saw value grow for the sixth consecutive year, though at the slowest rate out of any of those years (+1.1%).
• Regional Queensland’s values barely increased (+0.3%), though it was still the sixth consecutive financial year of rising values.
• Adelaide’s values increased for the fifth consecutive year, though at the slowest rate (+1.1%) since values fell in 2012-13.
• Regional South Australia experienced a third consecutive financial year of falling values, though at the slightest rate of decline for these years (-0.1%).
• Perth values fell for the fourth consecutive year, though the decline was the most moderate of those years (-2.1%).
• Regional Western Australia saw values decline more steeply (-3.3%) than the previous year, though it wasn’t the steepest in the last six consecutive years of declines.
• Hobart experienced a slightly smaller increase in dwelling values (+12.7%) on the previous year, though the past two years have seen the strongest growth since 2003-04.
• Regional Tasmania saw values increase for the fifth consecutive year, though at a marginally lower rate (5.6%) than the previous year.
• Darwin dwelling values fell for the fifth consecutive year, at a rate of decline (-7.7%) much greater than the previous year, though not quite as great as in 2015-16.
• Values in the Regional Northern Territory rose (+4.8%), which was an improvement on the previous year, when values experienced a significant fall.
• Canberra dwelling values increased (+2.3%) more slowly than the previous year, though this makes for four consecutive years of growth, following falls in three of the previous four financial years.

What’s the forecast for next financial year?

According to CoreLogic, the light at the end of the tunnel may not appear any time soon, with many of the factors that led to slowed housing growth in the recent financial year being unlikely to be removed over the coming financial year.

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