Perth Housing Market Update | October 2017

Perth Housing Market Update | October 2017


– Welcome to CoreLogic’s
October housing market update. This month we’re providing an overview of how the housing market performed over the September quarter, and we’re reviewing some of the factors contributing to a slowdown
in the rate of capital gains. CoreLogic’s national home
value index edges 0.2% higher over the month of September with dwelling values across
the capital cities of 0.3% compared with a 0.1% rise
across the broad regional areas of the country. The latest figures take
national dwelling values half a percent higher over
the September quarter. That’s the slowest pace
of quarterly capital gains since June of 2016. Focusing on the capital cities, dwelling values were 0.7% higher
over the September quarter which is well below the
recent peak rate of growth which was recorded back
over the three months ending November 2016. Back then the quarterly rate of growth was appreciating at 4.2%. The slowing in the combined
capitals growth trend has been heavily influenced by conditions across the Sydney housing market where capital gains have stalled. Sydney dwelling values
posted a month-on-month fall in September, down 0.1%, and the September quarter
saw Sydney values edge only 0.2% higher, a far cry
from the peak rate of growth recorded over the three
months to October last year when Sydney dwelling values were rising at the quarterly pace of 6.4%. While the Sydney region’s
looking increasingly like it’s moved through the peak, conditions across the
Melbourne marketplace have been more resilient. The pace of capital gains has slowed, but dwelling values were still 2% higher over the September quarter. Hobart further cemented its position as the best performing housing market after a recent history of
sluggish growth conditions. The past 12 months have
seen Hobart dwelling values surge by 14.3%, the city’s highest annual
growth rate since 2004. The remaining capital
cities have shown a diverse performance over recent months. Perth dwelling values looked to be moving through the bottom of the cycle with values edging 0.1%
higher over the month. However, values remain
lower over the quarter and over the year. For Darwin, the housing
market isn’t showing the same signs of bottoming out, with dwelling values slipping
0.7% lower over the month and 4% lower over the September quarter. In Brisbane the market’s been showing a growing divergence
between the performances of houses compared with units. House failures are up 0.2% over the month to be 4% higher over the past year, while unit values showed
an increase over the month but remained 2 1/2%
lower over the past year. Adelaide dwelling values
held firm over the month, but they’ve shown a 5%
rise over the past year. Canberra dwelling values
have increased by 7.8% over the past year, with a
fairly significant divergence between the growth in houses and units. Across the regional areas of Australia, growth rates have generally been lower compared to the capital
cities’ performance. The combined regional housing market saw dwelling values unchanged
over the September quarter, compared with a 0.7% rise in
capital city dwelling values. Similarly, over the past 12 months, regional values were up 5.6% compared with an 8.5% rise
in capital city values. Despite the overall weaker performance, growth rates have been remarkably strong in some regional markets, particularly those adjacent
to Sydney metro area. The strongest regional performance was the Newcastle and
Lake Macquarie region, where values were up by 15.3%
over the past 12 months. Southern Highlands and Shoalhaven values were up by 14.3%, and Illawarra where
values were 13.5% higher, rounded out the top three regional markets based on the 12 month
change in dwelling values. In Victoria, the strongest
regional market was Geelong, where growth was 11.4%, while in Queensland it
was the Sunshine Coast with an annual gain of 6.6%. The Perth housing market
is showing plenty of signs that it could be moving through
the bottom of its downturn. Since 2014, dwelling values across Perth have fallen by almost 11%, but last month values
edged slightly higher. Additionally, advertised
stock levels are 13% lower than a year ago, and properties are selling faster and vendors aren’t
offering as much discount from their asking prices. Additionally, year-on-year settled sales are up by 1.4% as buyer
demand starts to lift from a low base. The slowing in housing market conditions shouldn’t come as a surprise considering the recent history
of dramatic capital gains across the Sydney and Melbourne markets. Since dwelling values
started rising in 2012, Sydney values have surged by 75%, while Melbourne values are up by 57%. Macroprudential changes introduced by APRA at the end of 2014, and more
recently in March of this year, have played a key role in
curbing the pace of appreciation particularly in Sydney where investment has been most concentrated. On the back of change regulations, investors and interest-only borrowers now face a premium on
their mortgage rates. Based on the data to the end of August, variable rate investment loans were typically attracting
a 60 basis point premium. While we expect growth rates
to continue moderating, at least from a macro perspective, driven by Sydney and, to a
lesser extent, Melbourne, there are other factors that are likely to keep a floor under housing values. Housing demand, fueled
by strong migration, has risen during 2017, with the Australian Bureau
of Statistics reporting the third highest net
overseas migration result on record during the
March quarter of 2017. Australia added more
than 86,000 new residents from overseas over the quarter, most of which will contribute to demand for Australian housing. Almost 75% of these migrants arrived in New South Wales or Victoria. While investors are likely to scale back due to a disincentives
such as high mortgage rates and low rental yields, first home buyers are a rising presence in the housing market. Based on July data, first home buyers reached their highest level since 2013. Stamp duty concessions that
became available in July for first home buyers in New South Wales and in Victoria, helped to push the number higher, but other states where
incentives were unchanged also saw higher proportions
of first home buyer activity. Additionally, mortgage
rates are likely to remain close to historic lows. Although the cash rate may rise in 2018, the likelihood of a substantial
lift in mortgage rates remains very low considering
household debt levels are at record highs. Overall, we’re expecting the growth rates will continue to moderate across the combined capital
cities of Australia. However, the slowdown will
likely continue to be influenced by weaker conditions in Sydney and, to a lesser extent, in Melbourne. We’ll be tracking the movement
in housing market conditions along with other key economic
and demographic trends at www.corelogic.com.au.