Throughout the month of July, the national market increased by 0.5% which is the eighteenth time that values have increased since January 2023. This follows a decline of eight months prior. Overall, since that time, home values have increased 13.5% and which has taken the market to record highs since the latter part of 2023.
In recent times, the market has diverged, showing that Melbourne, Hobart and Darwin recording a decline in the three months to date of -0.9%, -0.8% and -0.3% respectfully. During this same period, Sydney has recorded a 1.1% gain which contrasts with the increase of 5% at the same period in 2023. This is in correlation with the overall national market of 1.7% and 3.2% over the same periods.
Looking towards the other capitals, Perth has recorded the highest growth over the rolling three-month period of 6.2% followed by Adelaide (5.0%) and Brisbane (3.8%). The growth in Brisbane has declined compared to the same time last year.
Source: CoreLogic
It is inferred that the divergence in growth between the capitals may be linked to supply on the market with Perth, Brisbane and Adelaide all recording greater than 30% below the stock that was at the same time last year. Whilst Melbourne and Hobart have recorded above average levels of stock.
The decline in affordability and borrowing capacity has influenced demand at the lower quartile of the market with all markets barring Canberra and Darwin recording growth in those areas. This growth in the three months to date have recorded an increase of 3.3%.
Regional housing values have recorded an increase of 1.3% across the combined regions. However, this is currently behind the 1.8% when compared to the combined capitals. When looking at the individual markets, Western Australia, South Australia and Queensland have recorded the highest growth with Regional Victoria recording a decline of -1.4% over the last three months.
Bucking the trend of recent years, units in all capital markets apart from Darwin and the ACT have risen faster than that of houses over the past three months. Influences of this trend may be due to the lowered borrowing capacity, an increase in first home buyer and investor activity and stretched housing affordability.
Rent prices across the board increased by only 0.1% across all markets with Sydney and Brisbane; both recording -0.1% and Hobart -0.3% showing a decline. The market in Sydney correlates with the easing of peak net overseas migration over the first three months of 2023.
As values increase in most of the capital cities and regional areas and with rentals softening, gross yields have also seen a decline. Coupled with the interest rate hikes from April 2022 and the maintained rates, positive cash flow properties have become more of a rarity.
As it has been for the past four years since Covid, the underlying mismatch between supply and demand in the housing market may continue for the second half of 2023. However, there may be signs of these aspects balancing out: Melbourne and Hobart now both have well above average listings with Sydney is seeing signs of normalisation. Data from Corelogic suggests that the balance of sales and ‘for sale’ listings for the past three months is now closer to what it was for the same time last year with 125,000 sales verses 121,000 new listings. This contrasts with 123,000 sales verses 112,000 new listings for the same period a year prior.
The supply of newly built homes are still seen as insufficient when it comes to the current population growth with a further -6.5% in the approvals of dwellings throughout June. This is compounded with other challenges such as reduced profit margins, a scarcity of skilled trades and high holding costs. On the other hand, construction costs have risen at the slowest annual pace over the last 12 months.
In conclusion, there has been a divergence of the capital markets with all markets with the exception of Melbourne, Darwin and Hobart recording growths. Perth has seen the biggest incline with Adelaide and Brisbane following. The supply of listings in Melbourne and Hobart have also underpinned the softening of the market. In addition, there are signs that the Sydney market may be normalising, though this is contrasted with the decline in building approvals which puts further pressure on demand.