Overall housing prices in Australia fell 0.7% in February from a month earlier. Although the pace of decline has slowed down from a few months ago, the downward trend is still unchanged.
So far, home prices in Australia have fallen to their September 2016 levels, with home prices falling in 14 months in the past 16 months. In February, housing prices in six of the eight capital cities fell month-on-month.
However, different regions, housing market performance is very different.
Overview of the Australian housing market in January and February
Home prices in Australia fell 0.7% in February from a month earlier. Housing prices in Australia have fallen 6.8% since hitting cyclical highs in October 2017.
So far, home prices in Australia have fallen to their September 2016 levels, with home prices falling in 14 months in the past 16 months.
While home prices have been falling for more than a year, prices are still up 18 percent from five years ago, suggesting that the vast majority of homeowners are still profitable.
Referring to the positive signs from February`s house price data, CoreLogic research director Tim Lawless said: "in February, the decline in housing prices in Australia eased from the previous two months. In December last year and January this year, home prices in Australia fell 1 percent from a month earlier. "
"in terms of quarterly rates, Hobart was the only capital city to record a month-on-month increase in housing prices in the three months to February, rising 1.1 percent. Over the same period, home prices in Canberra were flat on a month-on-month basis, while none of the other capital cities fell. "
"the performance of the Australian housing market continues to be weak, mainly in areas where the cumulative gains in previous years have been relatively large and where economic conditions are relatively robust," Lawless said. This is a sign that credit tightening has a wide-ranging repressive effect on buyer activity in the market. "
In addition, home sales across Australia fell 12.8 percent year-on-year in February, according to CoreLogic estimates. Among them, Sydney and Melbourne housing sales fell 20.6% and 22.1% respectively.
In terms of annual rates, housing prices in just three of Australia`s eight capital cities rose year-on-year in the year to February. Among them, Hobart with 7.2% increase ranked first. Notably, Sydney`s housing prices fell double-digit year-on-year, the biggest year-on-year decline since the 1980s. House prices in Brisbane fell 0.5% year-on-year, the first year-on-year decline since 2012.
If Melbourne`s housing prices continue to fall at a similar rate, we will also see double-digit year-on-year declines in the coming months, said Tim Lawless, head of research at CoreLogic. Melbourne`s housing prices have fallen 9.1% in the year to February.
In this round of decline, Perth and Darwin`s housing market was hit again. Not only did the best times fail to catch up, the housing market, which had struggled to improve, is beginning to worsen again. The weak performance of the local job market, coupled with the credit crunch, has led to downward pressure on house prices.
2. The performance of the housing market varies greatly from region to region
Compared with capital cities, the housing market in non-capital areas is more resilient. Overall housing prices in capital cities fell 7.6 percent in the year to February, compared with 1.4 percent in non-capital cities over the same period.
Compared to high-priced housing, low-cost housing performance is more resistant to fall. Over the past year, the number of high-priced homes in capital cities (the highest 25 percent) has fallen 10.7 percent, compared with 2.6 percent for low-priced homes (the lowest 25 percent), according to data.
As far as cities are concerned, housing in Sydney and Melbourne is significantly more expensive than in other cities, so prices in regions such as Hobart and Adelaide are more robust.
Lawless points out that the current trend is very clear. Sydney and Melbourne`s top-end housing markets were the weakest in this round of market downturns. By contrast, relatively affordable areas have clearly benefited from a surge in first-time buyers, making it the best-performing market in the downward cycle.
In addition, banks began to adjust their exposure and gradually tightened lending to borrowers with high mortgage-to-mortgage ratios and high debt-to-income ratios. This also drives some buyers to start looking for middle-class or low-end housing.
As far as capital cities are concerned, the strongest housing prices in the past year have been concentrated in Hobart, Canberra, Adelaide and Brisbane.
However, home prices in nine of the top 10 regions that have performed best in the past year have risen less than 5 percent as Australia`s housing market as a whole has lacklustre.
By contrast, the 10 worst-performing areas of the housing market in the past year are all in Sydney and Melbourne. Among them, Melbourne`s inner east side housing prices fell as high as 15.1%, ranking bottom.
The biggest drop in home prices over the past year has been concentrated in upscale residential areas in Sydney and Melbourne, Lawless said. These areas accumulate significantly higher relative to other cities during the housing cycle, and the ratio of house prices to household incomes is often the highest, making them "the most unaffordable areas of housing."
"as lenders such as banks gradually reduce their exposure to this segment of the market, the supply of credit in these areas is naturally more tense than elsewhere, further constraining local demand for housing."
Non-capital region
As far as non-capital regions are concerned, the strongest performance of the housing market is concentrated in the non-capital areas of Tasmania, as well as in the larger towns on the outskirts of Melbourne.
The results show that these areas often have ideal lifestyle, relatively cheap house prices, complete facilities, convenient commuting.
In contrast, the weakest housing jet lag in non-capital areas is concentrated in agricultural areas, as well as in the outskirts of Sydney. Among them, the former has been hit by drought and other natural disaster in the past year. The latter is mainly affected by excessive relative housing prices.
For example, the Newcastle and Illawarra housing markets on the outskirts of Sydney are significantly weaker than those in Melbourne. On the one hand, Melbourne`s peripheral home prices have a comparative advantage, on the other hand, Melbourne`s population growth is stronger, especially interstate immigration.
Overview of Australian Housing Rental Market in March and February
In February, driven by rising demand for rental housing, conditions in Australia`s rental market generally improved.
In February, median weekly rents in all capital cities, except Darwin, rose month-on-month. Across Australia, rents rose 0.3% month-on-month, up 0.4% year-on-year. However, from the trend data, most of Australia`s rental market conditions are weak.
In terms of capital cities, Canberra and Hobart were the best performers, with rents rising 4.7 percent and 4.6 percent respectively from a year earlier. By contrast, the housing markets in Darwin and Sydney were the worst, with rents down 6.1 percent and 2.9 percent respectively from a year earlier.
Although Australia`s rental market conditions are relatively weak, but rent yields continue to rise.
Among them, the capital city rent yield gradually recovered from the August 2017 low, from 3.39 percent in August 2017 to 3.81 percent in February of this year.
Notably, although much of Australia`s rental yields have picked up, Hobart is the exception. As local house prices rose faster than rents, Hobart`s rate of return fell over the same period. Hobart`s rental yield was 5.0 percent in the year to February, down from 5.2 percent in the same period a year earlier, according to data.
4. Factors affecting the housing market
First, credit data from (RBA) and Bureau of Statistics (ABS) show a continued slowdown in both credit supply and lending activity.
Since the second half of last year, there has been a significant decline in new home loans and no signs of improvement. Tim Lawless said: "although a slowdown in investment activity is a major driver of the housing market downside. But the impact of the recent sharp decline in homeownership activity is likely to be even more profound. The reason is that the amount of self-housing loans is twice as large as that of investing in housing. "
The impact of the decline in investment credit was concentrated in Sydney and Melbourne, while a sharp decline in home loans could affect the Australian housing market as a whole.
In addition to the supply of credit, a number of other factors have also had an impact on the ongoing downward trend in the housing market. These factors include an increase in supply of new homes, an increase in real estate for sale, a decline in overseas buyers and a decline in consumer confidence.
Increased supply of new housing
The entire housing part of the construction activity in the near future has reached an unprecedented peak. The increase in the supply of newly built housing has gradually highlighted the impact on some markets. In some high-density residential areas, for example, concerns about oversupply have begun to rise.
Increase in real estate for Sale
Affected by the decline of buyers and extended transaction cycle, the number of real estate for sale increased significantly. In addition to the surge in supply of new homes mentioned above, the number of second-hand homes sold on the market also rose sharply. The "buyer`s market" characteristics are obvious, many buyers enjoy a good bargaining advantage.
Reduction in overseas buyers
Foreign buyers accounted for just 6.5 percent of new housing demand, down from 17 percent at the end of 2014, according to the latest survey by the National Bank of Australia, (NAB). It is worth noting that the sharp decline in overseas buyers may have a greater impact on the high-rise apartment market.
Declining consumer confidence
A survey of consumer confidence released by the Western Pacific Bank / Melbourne Research Institute showed that consumers were pessimistic about future housing prices, which in turn curbed demand for housing, according to a survey of consumer confidence released by the Western Pacific Bank / Melbourne Research Institute.
END
Overall, according to Tim Lawless, head of research at CoreLogic, Australia`s housing market improved in February, judging from the decline in house prices. However, the decline in housing prices has expanded further, and there is no indication that Australia`s housing market has bottomed out.
Looking ahead, expectations of a bottoming rebound in Australia`s housing market will still require policy support, including monetary policy.
Although the bank has held back for 31 consecutive months, it has announced a record low interest rate of 1.5 percent. However, given the continued weakness of the housing market, Ausbank`s chances of further interest rate cuts have risen significantly.
In addition, the continued strength of the job market or promote income growth, and thus a good housing market.
Last month, the head of the Reserve Bank of Australia, Philip Lowe, called on the Fair work Council (Fair Work Commission) and corporate employers to provide more help to speed up the growth of workers` salary. "if workers are able to enjoy the increase in normal productivity gains, the corresponding annual salary growth rate will be 1 percent," he said. Plus 2.5% inflation, salary growth should be 3.5%. "
Source: CoreLogic
