Australian home values continued to trend higher in April with CoreLogic’s national Home Value Index (HVI) rising 0.6%. This was on par with the pace of gains recorded in both February and March, with the month-on-month rise adding approximately $4,720 to the national median dwelling value.
April’s increase takes the current growth cycle into its 15th month, with housing values up 11.1% or approximately $78,000 since the trough in January last year.
Beneath the headline numbers, we are seeing multi-speed conditions with the mid-sized capitals continuing to lead the pace of growth. Perth remains at the top of the growth charts with a 2.0% rise in April, followed by Adelaide at 1.3% and Brisbane at 0.9%.
The monthly change in Sydney values (+0.4%) has held reasonably firm around the 0.4% mark each of the past three months, while Melbourne’s market (-0.1%) has broadly stabilised after recording a subtle -0.8% dip over the three months to January.
The smaller capitals have emerged from relatively soft conditions, with both Hobart and ACT recording three months of consistent, albeit mild, rises in home values.
“We aren’t seeing any signs of heat coming out of the Perth housing market just yet, in fact the quarterly pace of growth, at 6.0%, is approaching the cyclical highs seen during the pandemic when interest rates were at rock bottom,” said Tim Lawless, CoreLogic’s research director.
“On the other hand, we are seeing the pace of gains slow across the Brisbane market, easing below the 1% mark to 0.9% in April for the first time in 12 months. Affordability pressures may be impacting the pace of growth across the city, following a nearly $300,000 increase in values since the onset of COVID in March 2020, the largest dollar value increase of any capital.”
Almost every capital city is recording stronger growth conditions across the lower value range of the market. Darwin, where housing affordability is less challenging, is the exception, while Sydney’s lower quartile and broad middle of the market are showing the same quarterly change at 1.7% compared with a 0.5% rise in upper quartile dwelling values.
“The shift towards stronger conditions across lower value markets can also be seen between the housing types, with growth in unit values outpacing house values over the past three months,” Mr Lawless said.
“Hobart was the only city where houses recorded a larger gain than units over the past three months.”
Regional markets have shown a slightly stronger quarterly growth rate over the past five months than their capital city counterparts, following a 10-month period where the combined capitals index was outperforming. Looking at value movements over the past three months, the strongest regional markets were aligned with the strongest capital cities. Regional WA (+5.3%) led the pace of gains, followed by Regional SA (3.9%) and Regional Queensland (+3.2%), while Regional Victoria (-0.1%) was the only rest of state market to record a decline in values over the rolling quarter.
Home sales look to have moved through a cyclical peak in November last year. Although the monthly trend in home sales is highly seasonal, the less seasonal six-month trend has remained relatively flat since the November rate hike. Estimated sales over the past three months are tracking 8.6% higher than at the same time last year, and about 5.1% above the previous five-year average. However, it is likely a combination of worsening affordability and low sentiment will keep a lid on the volume of sales until interest rates start to track lower.
Nationally, rents were up 0.8% in April, a slightly lower rate of growth relative to February and March when the national rental index rose 0.9% and 1.0% respectively.
“The slowdown in rental growth is likely to be partly seasonal, with the first quarter of the year generally coinciding with a lift in student demand and new leases at the beginning of the year,” Mr Lawless said.
“Additionally, as we move through the peak in net overseas migration we could see rental demand gradually easing. Although rental growth may be tapering, supply remains extremely short and the trend towards smaller households seen through COVID has been slow to reverse, further amplifying rental demand. It is likely rental growth will remain well above average for some time yet.”
Across the individual capitals, the quarterly change in dwelling rents remains above 2.0% in most cities, led by Perth with a 3.9% rise recorded over the past three months. At the other end of the spectrum, Darwin was the only capital to record a fall in rents over the quarter, although conditions were virtually flat at -0.1%.
Continued in the attached media release including graphs, charts and additional commentary and data on:
- Gross rental yields are rising, supported by national rents growth outpacing values since November last year. In April, the national gross rental yield rose to 3.75%, the highest reading since October 2019, up from a record low of 3.16% in January 2021.
- Supply vs demand: The persistent rise in housing values, despite an array of downside factors that would normally act to push prices lower, can be drawn back to the insufficient supply of housing relative to demand. Over the four weeks ending April 28th, CoreLogic estimates there were 76,265 homes listed for sale across the combined capitals; -17.6% below the previous five-year average. At the same time, the number of residential sales in April was estimated to be 2.4% higher than the previous five-year average for this time of the year. Capital city homes are currently selling in a median of 27 days compared with the decade average of 30.7 days and most cities are recording lower than average levels of vendor discounting.
- The outlook: With higher for longer interest rates a strong possibility, the recent upside surprise on inflation, a gradual loosening in labour markets, growing housing affordability challenges and a slowdown in economic activity, the downside risk for housing markets is building. Despite the worsening risk profile, housing values are likely to be propped up by the mismatch between housing supply and demand; a situation that doesn’t look like it will change in the near future.
- Top 10 Capital city SA3s with highest 12 month value growth – Dwellings
- Top 10 regional SA3s with highest 12 month value growth – Dwellings
- SA4, SA3, SA2 dwelling/house/unit values and rents (available by request)