Slowest quarterly rate of dwelling value growth since December 2015: CoreLogic
Captial gains momentum slowed over Q2 2017 with combined dwelling values rising by 0.8 percent over the June quarter according to CoreLogic.
The CoreLogic Hedonic Home Value figures for June show the slowest quarterly growth rate since dwelling values fell over December 2015 quarter.
Tim Lawless, CoreLogic head of research said the CoreLogic Home Value Index recorded a recovery from the 1.1 percent fall in May, with an 1.8 percent rise in capital city dwelling values over the month of June.
“This stronger month-on-month reading can be partially explained by the seasonality in the monthly growth rates," he said.
"Adjusting for this effect suggests an easing trend in housing value growth has persisted through the second quarter of 2017.
"The June quarter results showed that capital city dwelling values were 0.8% higher across the combined capitals index; the slowest quarterly rate of growth since December 2015 when the combined capitals index fell by 1.4 percent.
“This trend towards lower capital gains across the combined capitals index is mostly attributable to softer conditions across the Sydney housing market, where quarter-on-quarter growth was recorded at 0.8 percent over the June quarter; down from 5.0 percent over the March quarter. In contrast, the quarterly trend in Melbourne has been more resilient, with growth easing from 4.2 percent over the March quarter to 1.5 percent over the three months ending June.”
"For Sydney, the more pronounced slowdown is supported by weaker auction clearance rates which have been tracking in the high 60 percent range across the city over the last three weeks of June, while in Melbourne, clearance rates have moderated but remained above 70 percent.
“Both markets experienced auction clearance rates consistently in the high 70 percent to low 80 percent range over the March quarter."
Across the combined capitals, the annual pace of capital gains eased from 12.9 percent three months ago to 9.6 percent for June 2017. Sydney’s annual growth rate has slowed to 12.2 percent over the twelve months ending June 2017, down from a recent high of 18.9 percent three months ago. Melbourne’s annual growth rate is now the highest of any capital city at 13.7 percent over the twelve months ending June 2017.
Lawless said the change in rental growth conditions is most noticeable in Canberra and Hobart, where rents are respectively increasing at 8.4 percent and 6.2 percent per annum, however Sydney and Melbourne rental markets have also seen a turnaround in what was previously a sluggish rental market.
"Rents in both cities are 4.5 percent and 4.1 percent higher over the past twelve months.
"The growth in rents can be attributed to the ongoing significant rate of net migration into New South Wales and Victoria.
“While the rental growth turnaround will be welcomed by landlords looking to recover higher mortgage costs, the consequence is that renters are now facing renewed pressure as rents rise.
"In Perth and Darwin, rental conditions remain subdued, falling by 8.3 percent and 5.4 percent respectively over the year, while Brisbane rents slipped 0.2 percent lower and Adelaide rents held reasonably firm, up 1.1 percent.
“Although growth conditions have lost momentum across the largest housing markets, we are yet to see any signs of a material downturn.
"The key drivers for a slowdown have been gradual. They include: mortgage rates pushing higher despite a steady cash rate, lender credit policies tightening up and housing affordability - which remains a significant barrier for many prospective buyers. Additionally, higher supply levels in the unit market appear to be creating a drag on the performance of the unit sector in specific segments.
“The impact of macroprudential measures announced by APRA at the end of March are still flowing through to mortgage rates and credit policies. We are likely to see further tightening and repricing around investment lending and interest only lending over the coming months.
“Considering investors comprised just over 55 percent of new mortgage demand across New South Wales, based on the latest housing finance data from the Australian Bureau of Statistics, a further slowdown in investment activity is likely to have a more substantial impact on housing demand in Sydney relative to other markets.
“There is a possibility some of the slack created by less investment in the Sydney housing market could be taken up by first home buyers taking advantage of stamp duty concessions that go live on July 1, however if this is the case, it’s likely to be temporary as higher first-time buyer demand could simply push prices outside the range applicable to the concession.”