House prices are predicted to fall further
in Australia, with the biggest markets likely to take the most significant
hits. While the Australian market has been cooling for months now, annual
growth figures are almost neutral and auction clearance rates continue to fall.
According to the latest data from the CoreLogic home value index, annual growth
was just 1.2 percent in March 2018 on a national basis, with Sydney prices down
2.1 percent year-on-year, and Melbourne also showing signs of weakness.
National dwelling prices were unchanged on
a monthly basis in March, with values falling by -0.2 percent across the
combined capital cities and rising by 0.4 percent in regional markets. At just
1.2 percent, the annual rate of house price growth was at its lowest level
since December 2012. While all capital cities other than Sydney, Perth and
Darwin managed to record positive growth, regional markets experienced much
stronger growth than the combined capital city rate, at 2.6 percent and 0.8
percent respectively for the year.
According to Paul Dales from Capital
Economics, prices are only likely to drop further over the next couple of
years, thanks mostly to an increase in housing stock: "That usually means
that the balance of power is shifting from the seller to the buyer and that's
why we think house prices will probably continue to edge lower over the next
few years across most of the capital cities... Sydney and Melbourne might be
overvalued to the tune of 25 per cent or so... But at the other end of the
spectrum, some cities aren't particularly overvalued at all, places like Perth
and Darwin."
According to CoreLogic data, Darwin saw the
biggest fall in annual prices at -7.52 percent, followed by Perth at -2.41
percent, and Sydney at -2.10 percent. All other capitals recorded positive
growth, with Hobart recording the biggest increase at 12.96 percent, and
Melbourne performing strongly at 5.33 percent. Despite strong results in
Melbourne, the recent decline of auction clearance rates may be an indicator of
cooling conditions. According to Domain Group data, citywide weekly clearance
rates in Melbourne have fluctuated between 64 and 70 percent so far this year, with
rates hovering just above 50 percent in many suburbs.
According to CoreLogic, national
transaction volumes are much lower on an annual basis at -6.8 percent. The
volume of new and total stock listed for sale is also lower than it was a year
ago, with new listings down in all markets except Sydney and Melbourne. While
mortgage approvals are still well above their long term average, they fell
sharply by -6.2 percent in February 2018 thanks to a large decrease in
apartment approvals. The oversupply of apartments is one of the biggest issues
for the Australian market at the moment, with any significant drop to apartment
prices sending a clear warning sign to rest of the market.
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