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Housing downturn on par with GFC: CoreLogic

02 AUG 2022 By Kyle Robbins 4 min read Hotspots

The housing downswing appears to have accelerated in five Australian capital cities.

property values red down spi

The latest CoreLogic Home Value Index (HVI), for July, has found a 1.3 per cent decline in Australian dwelling values nationwide, buoyed by value declines in Sydney (2.2 per cent) and Melbourne (1.5 per cent) as well as Brisbane (0.8 per cent), Canberra (1.1 per cent) and Hobart (1.5 per cent) during the first month of the financial year.

For the Queensland capital, July represented the first month that values entered negative growth territory since August 2020.

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Prices bucked the national trend in Perth, where they climbed 0.2 per cent, Adelaide (0.4 per cent) and Darwin (0.5 per cent); however, CoreLogic reports that these markets have seen a sharp slowdown in capital gains since rates were first hiked in May.

CoreLogic’s research director Tim Lawless believes market conditions will worsen as interest rates continue to surge through to the end of the year.

“The rate of growth in housing values was slowing well before interest rates started to rise, however, it’s abundantly clear markets have weakened quite sharply since the first rate rise on May 5,” he said.

Mr Lawless explained that despite the relative infancy of the three-month long market downturn, the HVI indicates the current rate of decline is “comparable with the onset of the global financial crisis (GFC) in 2008, and the sharp downswing of the early 1980s”, with Sydney experiencing its sharpest fall in value in nearly 40 years.

He added that record levels of debt, as well as the compounding pressure of high inflation on household budgets, have made a large portion of Australian home owners sensitive to rising interest rates.

CoreLogic’s HVI also reported that regional markets have also begun to weaken, having recorded their first monthly decline (0.8 per cent) since August of 2020.

Regional NSW (1.1 per cent), Victoria and Queensland (both 0.7 per cent) and Tasmania (0.6 per cent) all reported a decline in dwelling values last month, as opposed to South Australia and Western Australia, which rose 1.1 per cent and 0.1 per cent, respectively.

“Dwelling values across CoreLogic’s combined regional index were up 41.1 per cent from the pandemic trough to the June peak, compared with a 25.5 per cent rise across the combined capitals index,” Mr Lawless said.

“The stronger growth reflects a significant demographic shift towards commutable regional markets, which is likely to have some permanency as more workers take advantage of formalised hybrid employment arrangements.”

After two years of strong growth, major regional centres close to Sydney, Melbourne, and Brisbane, such as Geelong, Newcastle, Wollongong, the Gold Coast and Sunshine Coast, recorded a decline in home values in the three months leading into July.

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