Australia: Slippage continues in dwelling prices - Westpac

Matthew Hassan, Research Analyst at Westpac, explains that the weak finish to 2017 for Australia's housing markets extended into early 2018 as the CoreLogic home value index, covering the eight major capital cities, dipped another 0.3% in Jan to be down 1.3% since Oct.

Key Quotes

“Annual price growth slowed to 2.0%, from a peak of 11.5% in May and dipping below the previous low in Sep 2016 to be the slowest pace since Dec 2012.”

“Note that strong caveats apply to all housing data around this time of year as transactions are typically much lower over the holiday 'off season'.”

“For prices there also appears to be a mild seasonal negative through this period worth about 0.2% a month, reflecting the low number of buyers. Allowing for this, the price weakness over the last 3mths looks to be steady rather than worsening.”

“The dwelling-type breakdown shows weakness concentrated in houses, down 0.4% with unit prices flat in the Feb month after dipping in Dec-Jan. The slowdown in price growth in 2017 was more pronounced for houses but the gap has narrowed a little in recent months as house price declines have eased and unit price growth has moderated.”

“Price weakness continues to be concentrated in Sydney, where annual price growth has dipped into negative (–0.5%yr) for the first time since late 2012. The price detail shows more pronounced falls for Sydney houses (0%yr) and for houses at the upper end of the market, (–4.4%yr for the top 25% of properties by value). Notably Sydney unit prices have been much better supported with annual price growth remaining positive across the spectrum.”

“Melbourne continues to see a much milder slowdown with annual price growth still running at 6.9%yr, now easily the fastest pace of the major capital city markets. Both houses and units are showing solid price growth with notably strong gains in the middle and lower price tiers.”

“Price growth was coming from much weaker starting points across the other capital cities and showed more muted slowdowns in 2017. Annual price growth is holding around 2% in Brisbane and Adelaide and with Perth prices continuing to correct at a 2.7% annual pace. Price growth has moderated slightly in most instances although weakness in unit prices in Brisbane and Perth has eased.”

“Overall, the Feb price update mainly reflects conditions in late 2017. We expect the next few month to give a better read on momentum in 2018 with early signs from auction markets looking a little better for Sydney but softening in Melbourne.”