The latest CoreLogic Home Value Index for June reported a second consecutive month of falls, bringing the national index down 0.7 per cent to $554,741.
National property values: June 2020
Over the month, the five largest capital cities posted negative growth with the biggest falls in Perth and Melbourne both recording a drop of 1.1 per cent. Declines in Sydney, Brisbane and Adelaide were more mild at 0.8 per cent, 0.4 per cent and 0.2 per cent respectively.
Over in the smaller markets however, property prices had a slight increase with Darwin up 0.3 per cent and Canberra rising a subtle 0.1 per cent.
Although consecutive declines in property prices may seem startling, CoreLogic Head of Research, Tim Lawless describes the downward pressure on home values to date as ‘mild.’
“A variety of factors have helped to protect home values from more significant declines, including persistently low advertised stock levels and significant government stimulus,” he said.
CoreLogic Head of Research, Tim Lawless describes the downward pressure on home values to date as ‘mild.’
Mr Lawless also notes that low interest rates and mortgage repayment holidays from lenders have also helped in insulating prices by keeping distressed sales from the market.
Taking a quick look at the auction market, for the week ending Sunday 28th of June, 1,424 homes were scheduled for auction and returned a preliminary auction clearance rate of 64.5 per cent. This is the highest number of auctions held in nine weeks, signalling improved seller confidence as clearance rates hold under higher volumes.
Sydney and regional NSW
In Sydney, property prices have lowered 0.8 per cent over the month to $875,749. However, when looking at growth on an annual basis, prices are still 13.3 per cent higher than they were a year ago.
The most expensive quartile of the market continues to lead the downturn in Sydney with the high end property market down 1.3 per cent over the past three months. In comparison, the most affordable lower quartile values were up 0.2 per cent.
Sydney auction results are also improving. For the week ending Sunday 28th of June, 614 homes were scheduled for auction and returned a preliminary clearance rate of 66.9 per cent. Compared to the same time last year, 503 auctions were held with a 67.9 per cent clearance rate.
Regional NSW property prices
In regional NSW, property prices are performing well with house values sliding up 0.3 percent and unit values remaining unchanged. This brings the combined median value to $467,571.
Melbourne and regional VIC
In June, Melbourne property values were one of the hardest hit of all capital cities posting the greatest declines. House and unit values both declined over the month bringing total dwelling values down 1.1 per cent to $683,529.
Although month-on-month property values have trended down, if we look at values on an annual basis, prices are still 10.2 per cent higher than they were a year ago.
Following the trend seen in Sydney, the top quartile of the Melbourne market continues to lead the downturn. Melbourne’s most expensive portion of the market has fallen 3.7 per cent over the past three months, while the most affordable pocket of the market has declined significantly less at 0.5 per cent.
Regional VIC property prices
In regional Victoria, house prices are down 0.5 per over the month while unit prices remained unchanged bringing the median price of a home to $392,030.
Brisbane and regional QLD
Values for Brisbane houses and units both fell over June, declining 0.4 per cent for houses and 0.8 per cent for units. For properties overall, prices decreased 0.4 per cent taking the median price of a home to $503,148.
Although prices have slipped slightly over the month, prices are still 4.4 per cent higher than they were a year ago.
With low cases of Covid-19, the State Government has brought forward further easing of restrictions allowing house parties, nightclubs and large concerts to return from Friday 3rd July. The Queensland borders will also open to other states from Friday 10th July, provided that travellers complete a border declaration stating they have not been to certain areas in Victoria in the last 14 days.
Regional QLD property prices
In regional Queensland, house prices have declined a slight 0.4 per cent over the month, while unit values remained unchanged. The overall median property value is now at $379,942.
Hobart and regional TAS
Overall property values in Hobart were one of the best performing in June, up 0.3 per cent to a median value of $487,827.
Houses in Hobart reported an impressive increase of 0.4 per cent in value while units remained unchanged.
When looking at prices annually, home values in Hobart are 6.4 per cent higher than they were last year.
Regional TAS property prices
Regional Tasmania also performed incredibly well over the month with the highest price growth of all the state regions. Property prices bumped up 0.6 per cent to $329,368.
Canberra and the ACT
Canberra property values remained positive in June recording an overall increase of 0.1 per cent bringing the median value to $639,965. Looking at the annual growth of dwelling values, property prices are 6.3 per cent higher than they were 12 months ago.
Houses were also up a slight 0.1 per cent while unit price growth outperformed all the other capital cities with a 0.3 per cent increase.
Auction results in Canberra have also been very impressive with results for the week ending Sunday 28th of June returning a preliminary clearance rate of 88.5 per cent for 34 scheduled auctions. This is more than double the clearance rate last year (42.9 per cent) with 28 scheduled auctions.
Adelaide and regional SA
Over June, Adelaide house and unit prices both decreased, falling 0.2 per cent and 0.3 percent respectively. This brings the overall dwelling value down 0.2 per cent over the month to $440,267.
When looking at property prices over twelve months, values are 2.0 per cent higher than they were last year.
Regional SA property prices
In regional SA, house values performed quite well, posting the second highest growth of all the regions with a 0.4 per cent lift to $249,035.
Perth and regional WA
In June, Perth house values took a tumble, sliding 1.1 per cent. This was the second highest drop of all the capital capities following Melbourne.
Unit prices in Perth were hit the hardest of all the capital cities with a fall of 1.3 per cent to $357,379.
When looking on an annual basis, along with Darwin, Perth is the only other capital city to report a lower value than the same time last year, a decline of 2.5 per cent.
Regional WA property prices
Over the month, regional WA saw the highest decline of all the state regions, with dwelling values falling 2.3 per cent. This brings the median value of a home to $307,888.
Darwin and regional NT
On par with Hobart, Darwin property prices have seen the highest month-on-month gains with an increase of 0.3 per cent. The median value of a property is now $387,914.
Darwin house values increased 0.4 per cent to $470,136 over the month while units bounced a slight 0.1 per cent.
Although prices are up over the month, compared to last year, property values are currently 1.5 per cent lower than they were twelve months ago.
Regional NT property prices
Regional Northern Territory house prices fell a slight 0.2 per cent over the month to $398,733. No data was available for Regional NT units.
Rents and rental yields
Rental rates continue to decline though June with significantly weaker conditions seen in the unit market. Over the last three months, capital city house rents have declined only 0.2 per cent while units are down 1.8 per cent.
Hobart stands out as the capital city with the largest declines in rent, a fall of 2.0 per cent for houses and 3.7 per cent for units.
Mr Lawless attributes the weak rental market to the conversion of many Airbnbs to long term rentals.
“A significant contribution to the previous tightening in Hobart rental conditions was the transition of permanent rentals to short-term and casual rentals such as Airbnb,” he said.
Mr Lawless however points out that rental stock may ease when interstate travel restriction relaxes and properties can revert back to Airbnb.
On the flip side, Perth is the only capital city to post an increase in rents for both houses and units. Currently, rents are up 1.0 per cent for houses and 0.1 per cent units. It is suggested that the lower level of investment participation and investment construction has kept rental supply quite tight.
Rental rates continue to decline though June with significantly weaker conditions seen in the unit market.
Regional areas are faring considerably better than capital cities, with the majority of the regional areas posting rent gains. For combined regionals, rents are up across units and houses, 0.3 per cent and 0.2 per cent respectively.
The best performing regional market was in South Australia with rents up 2.9 per cent for houses and 1.8 per cent or units over the last 3 months.
Taking a look at rental yields, Sydney rental yields are still at record lows of 2.7 per cent for houses and 3.4 per cent for units. Melbourne rental yields are following closely behind. Rental yields for other capital cities are all above 4.0 per cent with the highest at 6.8 per cent for Darwin units.
Mr Lawless notes that the weakest rental market conditions are centered around inner Sydney and Melbourne units. In these areas, listings have risen more than 40 per cent in the past few months as demand demishes. “Foregin students simply haven’t arrived, domestic students are studying from home and overseas migration has temporarily stalled,” he said.
The current national rental yield sits at 3.6 per cent for houses and 4.0 per cent for units.
What does this mean for the Australian property market? What is the outlook for the months ahead?
From what we can see, the impact of Covid-19 on the Australian housing market has been milder than initially anticipated with a fall of just 1.3 per cent in capital city dwelling values over the past two months.
Significant government stimulus, mortgage repayment holidays, low stock on the market and continual easing of social distancing measures have all worked together to help insulate from any large price drops. According to the RBA governor, the current trajectory of the Australian economy is somewhere between the best case scenario and the central case scenario.
So far, the impact of Covid-19 on the Australian housing market has been milder than initially anticipated
Although we are taking positive strides forward, there are still risks that can negatively impact the property market. The recent rise in Covid-19 cases in Victoria is a reminder that the risk of a return of tougher restrictions is a real possibility. Mr Lawless concludes that “despite the early signs of improved economic activity and a lift in housing turnover, the downside risk remains significant.”
In all other states however, cases have been extremely low and as a result, restrictions continue to ease and consumer confidence continues to bounce back.