I have been saying for some time that some property markets are on the turn. More evidence of this has now been published. And while aggregate data is averaged, CoreLogic’s October report does highlights a modest rise in national home values, but easing annual growth, and shifting market dynamics across different regions and property segments with wider falls.
They say that nationally, their Home Value Index recorded a 0.3% rise in October, but it was driven by mid-sized capitals like Perth, which saw a 1.4% increase, whereas Sydney saw a -0.1% decline in home values, alongside declines in Darwin (-1.0%), Canberra (-0.3%), Melbourne (-0.2%), as well as regional Victoria (-0.2%) in the month.
We also see that upper quartile house values are falling more than lower quartile values, which recorded a rise. The trend of stronger performance in the affordable market segment is consistent across capital cities.
A combination of less borrowing capacity and broader affordability challenges, as well as a higher-than-average share of investors and first home buyers in the market is the most likely explanation for stronger conditions across the lower value cohorts of the market.
Slower growth in home values has been accompanied by a rise in advertised stock levels. Based on a rolling four week count of listings to October 27th, advertised inventory has increased 12.7% since the end of winter across the combined capitals, with the largest increase occurring in Perth where listings are 20.6% higher, albeit from an exceptionally low base.
Alongside the rise in advertised supply, the number of home sales looks to be fading. Estimates for capital city sales activity over the three months ending October were down -7.5% from three months earlier and -1.6% lower than at the same time last year.
My analysis shows that more investors are under water from a cash flow perspective, and we are seeing more investors jumping ship, while others are buying.
All up given the higher for longer trajectory of both inflation and interest rates, I suspect we will see continued weakness in several markets into 2025.
But as always we need to go granular to see the detail across locations and property types. I will be sharing some of my mapping on this in the next few days.
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