Housing Values: Low Supply Trumps Rates, Inflation

Australia’s housing values continued to rise last month with the WA capital again leading the way.

Perth’s 2 per cent rise in April was the nation’s biggest, according to CoreLogic’s latest Home Value Index (HVI).

Nationally, value rose 0.6 per cent, on par with the pace of gains recorded in February and March, with the month-on-month rise adding about $4720 to the national median dwelling value.

April’s increase takes the current growth cycle into its 15th month, with housing values up 11.1 per cent or about $78,000 since the trough in January last year.

Multi-speed conditions persist across the nation with mid-sized capitals continuing to lead the pace of growth.

Adelaide at 1.3 per cent and Brisbane at 0.9 per cent followed Perth as the biggest gains for the month.

The monthly change in Sydney values (up 0.4 per cent) has held reasonably firm around the 0.4 per cent mark for each of the past three months, CoreLogic said, while Melbourne’s market (-0.1 per cent) has broadly stabilised after recording a “subtle” -0.8 per cent dip during the three months to January.

The smaller capitals have emerged from relatively soft conditions, with Hobart and ACT recording three months of consistent, albeit mild, rises in home values.

“We aren’t seeing any signs of heat coming out of the Perth housing market just yet, in fact the quarterly pace of growth, at 6 per cent, is approaching the cyclical highs seen during the pandemic when interest rates were at rock bottom,” CoreLogic research director Tim Lawless said.

“On the other hand, we are seeing the pace of gains slow across the Brisbane market, easing below the 1 per cent mark to 0.9 per cent in April, for the first time in 12 months.

“Affordability pressures may be impacting the pace of growth across that city following a nearly $300,000 increase in values since the onset of Covid in March 2020—the largest dollar value increase of any capital.”

Almost every capital city is recording stronger growth conditions across the lower value range of the market.

Darwin, where housing affordability is less challenging, is the exception, while Sydney’s lower quartile and broad middle of the market are showing the same quarterly change at 1.7 per cent compared with a 0.5 per cent  rise in upper quartile home values.

▲ Brisbane posted the third biggest increase in home values for April. Image: Romain Terpreau/Unsplash

“The shift towards stronger conditions across lower value markets can also be seen between the housing types, with growth in unit values outpacing house values over the past three months,” Lawless said.

“Hobart was the only city where houses recorded a larger gain than units over the past three months.”

Regional markets have shown a slightly stronger quarterly growth rate during the past five months than their capital city counterparts, following a 10-month period where the combined capitals index was outperforming.

Looking at value movements over the past three months, the strongest regional markets were aligned with the strongest capital cities.

Regional WA (up 5.3 per cent) led the pace of gains, followed by Regional SA (3.9 per cent) and Regional Queensland (+3.2 per cent), while Regional Victoria (-0.1 per cent) was the only rest-of-state market to record a decline in values over the rolling quarter.

Home sales look to have moved through a cyclical peak in November last year.

Although the monthly trend in home sales is highly seasonal, the less seasonal six-month trend has remained relatively flat since the November rate hike.

Estimated sales during the past three months are tracking 8.6 per cent higher than at the same time last year, and about 5.1 per cent above the previous five-year average.

However, it is likely a combination of worsening affordability and low sentiment will keep a lid on the volume of sales until interest rates start to track lower, CoreLogic said.