Home values flat in October: Westpac's Matt Hassan

GUEST OBSERVER

The CoreLogic home value index held flat in October taking annual growth to 7%, an abrupt slowdown from the 11.4% peak in May.

Policy measures continue to have a material impact. Although official rates remain near historic lows, regulators introduced a new round of 'macro prudential' tightening measures in late March.

Meanwhile a range of other changes have also seen a progressive tightening of conditions facing foreign buyers.

The CoreLogic indexes were overhauled in August and now provide a much better guide to price changes.

Whereas previously it would take three to six months and/or multiple measures to confirm a market shift, the new series appear to give much cleaner signals month to month and are now the clear 'benchmark' for Australian dwelling prices.

For October, the signals are unambiguously soft. Our estimates suggest the last three months have seen a small dip declining at about a 0.9% annual pace in seasonally adjusted terms (note that the Aug-Sep-Oct period typically sees some firming in prices as the spring selling period begins).

Sydney continues to record the sharpest turnaround in conditions, annual price growth slowing to 7.7% in October, essentially halving since July. Melbourne continues to see a much milder turn with price growth still tracking at 11%.

Price growth remains steady but more subdued elsewhere; tracking at 2.7% in Brisbane; and 4.6% in Adelaide with price continuing so slip lower in Perth (–2.5%).

The houses vs units breakdown shows a more pronounced slowdown for houses with annual price growth slowing to 7.2% from 12.4% in May.

Our monthly seasonally adjusted estimates suggest prices have been declining at about a 2% annualised pace over the last three months.

Unit price growth has been more stable throughout, lower through the peak and with a milder slowdown – annual price growth 6.5% down only slightly since the 8.5% peak in July and momentum holding in positive territory over the last three months. 

Notably, the detail suggests the pace of unit price declines in Brisbane and Perth is moderating while price growth in Melbourne units has shown essentially no slowing to date.

The slowdown is likely to carry through to year end. However, the next few months will be a critical gauge of whether markets are starting to stabilise.

To date, the timeliest market measures – buyer sentiment, auction clearance rates and prices – are showing few signs of levelling out. However, some of the pressure from macro-prudential measures may ease off a little.

Click here to read the full report.

Matthew Hassan is senior economist with Westpac.