CoreLogic: August 2016 Market Outlook

Eager to find out what August might have in store for the property markets? Cameron Kusher, Analyst at CoreLogic Research, has looked into his crystal ball.

Value growth predictions

• Value growth has slowed on the whole over recent months, but the two largest and most expensive cities, Sydney and Melbourne, have continued to record relatively rapid rates of value growth.

• CoreLogic predicts that the combination of slowing housing finance demand, stretched affordability, higher supply and tighter lending rules will result in slower value growth over the second half of 2016, particularly in Sydney and Melbourne. While values are expected to continue to lift, the expectation is that any increases will occur at a slower pace.
• Markets like Brisbane, Hobart and Canberra may see an increase in housing demand as Sydney and Melbourne slow. However, this will be driven by either investment or employment opportunities.  
• Investors may look outside of the two major capital cities but will be cautious of potential housing oversupply and those moving out of Sydney and Melbourne would want to be fairly confident of securing employment elsewhere.  
• We expect value growth in Adelaide to moderate from current levels but there is an expectation that values will continue to rise, albeit at a fairly slow pace.  
• The rate of decline in values in Perth and Darwin looked to be slowing over recent months. However, they have gathered pace recently. These markets remain in transition and values could continue to fall over the remainder of this year.

Different growth drivers affecting different markets

• The ongoing diversity in the housing market highlights the different growth drivers that are evident from region to region.
• The economies of Sydney and Melbourne remain relatively sheltered from the downturn in the resources sector and have benefited from a very healthy services sector and positive population inflows while the mining states and territories are experiencing softer economic conditions and a sharp wind down in population growth, particularly from overseas migration.

A look back at what happened in July 2016

• The CoreLogic Home Value Index shows that in July 2016, half of the capital cities recorded monthly rises with the other half recording declines. Values rose in Sydney, Melbourne, Adelaide and Hobart and fell elsewhere.
• Combined capital city home values have increased by 6.1% over the 12 months to July 2016. This growth rate represents the slowest annual rate of growth since September 2013.
• Sydney and Melbourne have recorded the largest increases in home values over the past year, up 9.1% and 7.5% respectively. Despite the fact they are the standouts for value growth, capital gains across both cities have slowed from their peak and it is Melbourne’s slowest rate of growth since April 2015.  
• Outside of Sydney and Melbourne, the annual changes in home values have been recorded at: +3.9% in Brisbane, +4.8% in Adelaide, -5.6% in Perth, +6.2% in Hobart, -7.6% in Darwin and +2.9% in Canberra. Home values in Perth have now been trending lower since December 2014 and in Darwin they have been trending lower since July 2014.
• Houses and units have recorded similar annual growth rates across the combined capital cities with house values 6.1% higher and unit values 6.0% higher. Looking at the individual cities the trends are somewhat different. In Melbourne, Brisbane and Canberra the annual rate of growth for units is less than half that for houses while in Darwin unit values have declined by more than double the decline for houses. In Sydney and Hobart unit values have increased at a faster annual pace than houses.
• Combined capital city rents have fallen by -0.6% over the 12 months to July 2016. Rental rates have fallen over the year in Brisbane, Adelaide, Perth and Darwin and are increasing at their slowest pace on record in Sydney.
• The volume of new stock becoming available for sale has increased a little over the past two weeks but is at close to record low levels outside of the Christmas and New Year period. These figures would seem to indicate that new supply is limited while a proportion of stock is remaining on the market for a longer time, potentially because sellers aren’t willing to adjust price expectations and/or negotiate on price.  
• New listings are lower than they were a year ago in all capital cities except for Perth and Hobart.
• Meanwhile, total property listings are higher than they were a year ago in all capital cities except for Melbourne, Hobart and Canberra.
• June 2016 data for the average days on market shows that the typical capital city home is selling after 47 days compared to 42 days at the same time last year. Outside of the Christmas/New Year period, this represents the longest average time on market since August 2013.  
• Homes are taking longer to sell than they were a year ago in Sydney, Brisbane, Perth, Darwin and Canberra, selling quicker in Adelaide and are unchanged in Melbourne.