Kaytlin Ezzy, Economist, CoreLogic

CoreLogic’s national unit index increased 0.6% over March, rising for the first time in 11 months. Following last month’s flat result, March’s uptick took unit values just -0.4% lower over the quarter and saw the annual decline trend reduce from -5.6% over the 12 months to February to -5.3% over the year to March. The subtle increases seen in Sydney unit values in February became more geographically broad-based, with six of the eight capitals recording a monthly rise in unit values.

CoreLogic Economist Kaytlin Ezzy said excess demand from the extremely tight rental market, strong overseas migration, and the tonal shift and subsequent pause in rate hikes from the RBA, had likely put upward pressure on demand while total unit listing levels remain well below average. With a similar monthly rise recorded in national house values (0.6%), the uptick has many wondering if we have passed through the bottom of the market downturn.

“It’s looking increasingly like we have moved through a trough in unit values, however, a number of headwinds are still apparent, including further rate rises, an expectation for weaker economic activity through the year, and the potential for a lift in advertised stock levels. However, as we move through a possible inflection point, it can be useful to compare the current unit downswing to both previous periods of value decline and to the cumulative value drops seen in the housing market,” Ms. Ezzy said.

In January, the cumulative decline in national dwelling values overtook the 2017-2019 downswing as the largest decline on record, with the trend in dwelling values pulled down by the -9.7% fall in house values seen through the first nine months of the downswing (increasing to a -9.9% decline over the first 10 months). By comparison, the -6.1% drop in national unit values between April 2022 and January 2023 was moderate relative to both the house value falls and to previous unit peak-to-trough declines.

Figure 1 displays the cumulative decline in national unit values compared to previous peak-to-trough declines on a months-since peak basis. Unlike the house and broader dwelling market, the decline seen in unit values since April 2022 is behind both the 1989-91 downswing (-8.3%) and 2017-19 drop (-7.0%) in terms of cumulative decline, and also behind the 1989-91 in terms of speed.

“If this month’s improvement in values isn’t a false start, it’s likely we won’t see much momentum in the recovery phase until a catalyst for a new growth phase becomes apparent,” said Ms. Ezzy.

“For example, a decrease in interest rates, renewed fiscal stimulus such as first home buyer incentives, or an easing in credit policies such as a reduction to APRA’s serviceability buffer could see an increase in housing demand.”

To see the full report click here.