Since peaking in September 2017, the national dwelling values have been dipping with the latest February results continuing the trend.
Though February 2018 showed a moderate 0.1 percent decline compared with the 0.3 percent falls recorded over each of the previous two months, this is the first time national values have fallen for five consecutive months since March 2016.
Results from the CoreLogic Hedonic Home Value Index of February 2018 reveal a divergence between capital city and regional markets, with the combined capital city index falling by -0.3 percent over the month, compared to a 0.4 percent increase in combined regional values.
February saw housing values fall across every capital city except Hobart (+0.7 percent) and Adelaide (steady), with the largest monthly decline recorded in Darwin (-0.9 percent) and Sydney (-0.6 percent), while values were lower in Melbourne (-0.1 percent), Brisbane (-0.1 percent), Perth (-0.2 percent), and Canberra (-0.3 percent).
However, the rate of decline eased over the second half of February with Sydney, Melbourne and Perth all recording more moderate falls in values than they did in January.
Adelaide (0.1 percent) and Hobart (3.2 percent) were the only capital cities in which values rose in the three months to February 2018. Sydney, considered one of the strongest markets for value growth, saw the largest fall in values over the same period at -2.4 percent, followed by Darwin with a -2.0 percent fall.
Regional markets outperformed the capital cities with regional dwelling values increasing by 0.9 percent over the three months.
National dwelling values also recorded their slowest annual rate of growth since August 2016 with a 2.2% rise over the 12 months to February 2018. Even here, regional areas (combined 2.8 percent) outperformed the capitals (combined 2.0 percent) with the gap widening over the past month.
Outside of the capital cities, regional New South Wales (5.7 percent), regional Tasmania (5.5 percent), regional Victoria (4.3 percent), regional Northern Territory (1.6 percent) and regional Queensland (0.5 percent) have each recorded increases in values over the past year. In regional South Australia and regional Western Australia values have fallen by -0.1 percent and -4.7 percent respectively.
While dwelling values have been falling over the past three months, rental rates have been increasing in the same period. Except for Perth and Darwin, all capital cities have higher rental rates over the year; similarly, except for regional Western Australia, all regional markets are experiencing a high in rental income.
CoreLogic head of research, Tim Lawless observes that gross rental yields are starting to repair after a long period of yield compression.
Gross rental yields over the last 12 months are now at their highest in Sydney since October 2016, and the highest in Melbourne since September 2017.
Key highlights of the CoreLogic Hedonic Home Value Index February 2018
Nationally, dwelling values are flat or declining
After the -0.3 percent dip in both December and January, the -0.1 percent fall in February represents a slowing of the continuous decline.
Migration rates are supporting housing demand
Migration rates remain high; however, New South Wales residents are moving interstate, particularly to Queensland, easing demand for housing in markets such as Sydney.
Labour markets are tightening
While national unemployment rates have been fairly steady over recent months, with the rates higher than the national average outside of New South Wales, Northern Territory and Australian Capital Territory, jobs growth has picked up recently in other regions, particularly in Queensland.
First home buyers are supporting demand at the lower value end of the market
The New South Wales and Victorian housing markets are witnessing a surge from first home buyers, boosted by recent stamp duty concessions.
APRA benchmarks have been overachieved
Some lenders have reduced rates on investment loans, indicating that they have freed up some funds for the investor segment.
Interest rates to remain low
Interest rates will eventually lift from their historic lows but higher interest rates are likely to be some way off.