What does inflation mean for the Australian housing market?
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  • Most capital cities saw a decline in the momentum of falling house values
  • Darwin is the only capital where housing values haven't trended lower
  • Spring season has had a slow start, with listings below five-year averages across most markets

In its monthly home value index, CoreLogic recorded a further fall in housing values last month (-1.4%), less than the – 1.6% fall in August, hinting the rate of decline is already showing signs of easing.

Most of the capital cities saw a loss of momentum in the pace of value decline, although there were two notable exceptions – the Perth and Adelaide markets.

Housing value falls accelerated in both cities by – 0.2% and – 0.4% respectively, although this is a mild decline compared to Sydney, which fell by – 1.8% in September and – 2.3% in August.

Melbourne fell from -1.2% to – 1.1%, with Brisbane falling from -1.8% to -1.7%.

Home Value Index – September 2022

home value chart september 2022
Source – CoreLogic

Darwin is the only capital city where housing values haven’t trended lower, although dwelling values remain 10% lower than the 2014 peak.

Although it is too soon to evaluate whether the worst of the downturn is over, CoreLogic’s research director, Tim Lawless, noted that many buyers are now factoring in future interest rate rises.

“It’s possible we have seen the initial shock of a rapid rise in interest rates pass through the market and most borrowers and prospective home buyers have now ‘priced in’ further rate hikes,” he said.

“However, if interest rates continue to rise as rapidly as they have since May, we could see the rate of decline in housing values accelerate once again.”

Tim Lawless, CoreLogic

Tim Lawless, CoreLogic
Tim Lawless, CoreLogic Head of Research. Image – CoreLogic

Mr Lawless noted that other housing market indicators showed signs of improvement during the month.

“Auction clearance rates also trended upwards, albeit subtly, in September and consumer sentiment nudged a little higher as well on the back of strong labour market conditions,” he said.

“We’ve also seen the flow of fresh listings continue to slide through the first month of spring, which is uncommon for this time of the year.”

With house prices rising by 25.5% during the recent growth cycle, prices across the combined capitals are now -5.5% below the recent peak or down about $46,100 in dollar terms.

Housing values in Sydney are now -9%, or – $104,300, below their January 2022 peak.

Despite these declines, there is still a substantial buffer between current housing values and where they were in March 2020. Housing values across the combined capitals would need to fall by a further 13.5% before the gains of the recent cycle are completely wiped out. Not impossible, but unlikely.

“We are still seeing some resilience to value falls around the more affordable areas of Adelaide and Perth, as well as some regional markets associated with agriculture, mining and tourism,” Mr Lawless said.

“The largest cumulative falls have been concentrated in areas of Sydney’s Northern Beaches, including the SA3’s of Warringah, Pittwater and Manly where housing values are down at least -14.5% since moving through a peak in early 2022, as well as flood affected areas across Richmond – Tweed.

“These areas saw housing values rise between 38% and 62% through the growth cycle, so most home owners are still well ahead in terms of equity in their home.”

Slow start to spring season

While spring is known as a time when the flow of new listings ramps up, this year it is off to a slow start.

The number of new capital city listings was 12% lower during the four week to 25 September this year compared to last year, and -10% below the five-year average.

New listings, rolling 28 days count, combined capitals

new listings rolling 28 daysjpg
Source – CoreLogic

Canberra and Darwin were the only capital cities to record a higher flow of new listings during the same period.

“It seems prospective vendors are prepared to wait out the housing downturn, rather than try to sell under more challenging market conditions,” Mr Lawless added.

“We haven’t seeing any evidence of distressed sales or panicked selling through the downturn to date; in fact, it has been the opposite, with the trend in newly listed properties continuing to diminish at a time when freshly advertised stock levels would normally be moving through a seasonal ramp up.”

Despite this decline in new listings, total advertising inventory is holding firm in even rising across most markets. Advertised stock levels are 7% higher now compared to the same time last year.

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