Price adjustment hits 20 month mark but correction continues to slow: Westpac's Matthew Hassan

Price adjustment hits 20 month mark but correction continues to slow: Westpac's Matthew Hassan
Price adjustment hits 20 month mark but correction continues to slow: Westpac's Matthew Hassan


The correction in Australian dwelling prices that has been running since late 2017 is showing clearer signs of moderating in early 2019.

The CoreLogic home value index, covering the eight major capital cities, fell 0.4% in May to be down 8.4%yr. After tracking a 10% annualised pace of decline between Nov and March, price slippage has been running at a more moderate 6.7% annual pace over the last two months.

While that is a clear improvement it is still well short of stabilisation.

Prices nationally are now 10.7% below their Sep 2017 peak. The current price adjustment has now been running for 20mths putting, eclipsing the much shallower 2010-11 correction.

More major capital cities recorded price declines in May. The moderation in price falls continues to be slightly more pronounced in the Sydney and Melbourne markets.

The annual pace of declines in these markets improved for the first time since early 2017 but is still tracking a solid pace, –10.7%yr in Sydney and –9.9%yr in Melbourne with cumulative declines of 14.9% and 11.8% respectively.

Performances across other markets continue to be more varied. Perth's longer running correction accelerated again, prices down –1%mth, –8.8%yr. Brisbane, which was stable through 2018, has continued to see price slippage in 2019, prices down –0.5%yr, –2.3%yr. Adelaide remains an isolated area of calm amid the sea of red, prices nudging 0.2% higher in the month to be up 0.4%yr, essentially stable.

Across the smaller markets: Hobart is coming off its boom sharply with a second month of price declines paring annual price growth back to 3.4%yr, well down on the double digit pace nine months ago. Canberra has been steadier, prices dipped 0.2%, annual growth holding just under 2.5%yr.

The mining-dominated Darwin market is mirroring the difficult conditions in Perth, its long-running correction also re-accelerating with a 1.6% decline in the month taking prices down 8.6%yr to their lowest level in over 12yrs.

The dwelling type detail continues to show units outperforming houses slightly in recent months although both segments are showing a similar moderation in the pace of price declines.

The breakdown by tier shows a more pronounced moderation in price declines across properties in the top tier, albeit with this group coming from a weaker starting point. In Sydney, the three tiers have been tracking closely over the last 3mths. Bottom tiers are outperforming in Melbourne and Brisbane, with prices in these segments close to stabilisation.

The moderation in price declines is consistent with the improved tone from auction markets in recent months, with a notable lift post-election, the result meaning changes to the tax treatment of investor housing are now off the table.

With interest rates set to move lower, some relaxation in regulatory guidelines for loan assessments likely and increased Federal assistance for first home buyers, prospects for an eventual stabilisation in prices are looking considerably better, boding well for an eventual stabilisation in prices.

MATTHEW HASSAN is a senior economist for Westpac

Westpac Housing Correction

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