Despite growth rates slowing, dwelling values continue to rise across the country according to CoreLogic’s national home value index, with evidence showing there are less first home buyers in the market for the first time in nearly a year.

Housing values across the country lifted 1.8 percent in April, with the monthly pace of capital gains easing from a 32-year high in March of 2.8 percent.  

Despite the slowing of growth conditions, housing values are still rising at a rapid pace, up 6.8 percent over the past three months to be 10.2 percent higher than the COVID low in September last year.

The Australian Bureau of Statistics has reported a -4 percent fall in the value of first home buyer loans through February, the first drop since May last year. This could be attributed to the Commonwealth’s HomeBuilder scheme coming to a close.

CoreLogic’s Research Director, Tim Lawless, says the pace of capital gains could slow further over the coming months as inventory levels rise and affordability constraints dampen housing demand.

“The slowdown in housing value appreciation is unsurprising given the rapid rate of growth seen over the past six months, especially in the context of subdued wages growth. With housing prices rising faster than incomes, it’s likely price sensitive sectors of the market, such as first home buyers and lower income households, are finding it harder to save for a deposit and transactional costs,” he says.

Every capital city and ‘rest-of-state’ region recorded a lift in dwelling values over the month. Darwin and Sydney recorded the largest month-on-month rise at 2.7 percent and 2.4 percent respectively, with Perth recording the lowest growth rate at 0.8 percent.

From an annual perspective, the four smallest capital cities recorded double digit annual growth (Adelaide 10.3 percent, Hobart 13.8 percent, Darwin 15.3 percent and Canberra 14.2 percent), reflecting a smaller COVID-related disruption and an earlier start to the growth phase last year. Melbourne is recording the lowest level of annual growth at 2.2 percent due to a larger downturn, attributable to the extended lockdown period last year.

CoreLogic says the housing market has moved through a peak rate of growth. Described as unsustainable, growth conditions over the last six months will gradually slow down in demand due to worsening affordability constraints, a rise in fresh inventory, higher levels of new detached housing supply and less government stimulus.

The housing analytics specialists expect housing values to rise throughout this year and next, but at a steadier and slower rate. Demand should be supported by an expectation that mortgage rates will remain at their record lows for an extended period of time, as well as ongoing high levels of consumer confidence as the economy expands at a faster than average pace. 

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