House prices declined 0.7 per cent nationally for the month of June - the second consecutive fall, after tumbling 0.4 per cent in May, new data reveals.
Each of the five largest capital cities recorded a decline in home values over the month, according to CoreLogic’s Hedonic Home Value Index, ranging from 1.1 per cent falls in Melbourne and Perth to 0.2 per cent falls in Adelaide.
In Sydney, home values dropped 0.8 per cent, with the median price now at $875,749.
Surprisingly, the indices in smaller capital cities Hobart, Canberra and Darwin each recorded slight increases in home values, the report found.
Leading the downturn is the most expensive quartile of housing, the report found.
“Higher value markets tend to be more reactive to changes in the environment, having led both the upswing and the downturn over previous cycles,” CoreLogic head of research, Tim Lawless said.
“The past three months has seen this trend playing out, with upper quartile values down 1.7 per cent across the combined capital city index over the past three months, while lower quartile values have fallen by only 0.3 per cent.”
But despite the falls, sales activity showed improvement: the report estimated home sales were up 29.5 per cent in June, after rising 21.5 per cent in May.
“The downwards pressure on home values has remained mild to-date, with capital city dwelling values falling a cumulative 1.3 per cent over the past two months.” Lawless said.
“A variety of factors have helped to protect home values from more significant declines, including persistently low advertised stock levels and significant government stimulus.
“Additionally, low interest rates and forbearance policies from lenders have helped to keep urgent sales off the market, providing further insulation to housing values.”
House price values over 12 months
Annually, growth rates are still high, the report found.
“The 12 month change in home values remains in positive double digit territory across Sydney (13.3 per cent) and Melbourne (10.2 per cent),” Lawless said.
“The only capitals where values show declines on an annual basis are Perth and Darwin, but even across these cities, home values were early into a recovery phase pre-Covid.”
Longer term outlook ‘uncertain’
While the house price decline has been relatively mild, given the economic uncertainty caused by the pandemic, the future of the housing market is also uncertain.
“While it is encouraging to see lenders have recently hinted at an extension in their repayment leniency policies, the government stimulus will eventually taper and banks will require borrowers to repay their loans,” Lawless said.
“The longer term outlook for the housing market is largely dependent on how well the economy is tracking when these support measures are removed.”
But there are some positive signs: real estate agent activity is tracking higher than the same time last year, the number of listings is ramping up and auction markets have shown a partial recovery.
Domain economist Trent Wiltshire told Yahoo Finance that some areas would bounce back quicker than others, however.
Areas that aren’t so reliant on international students and tourism, and that have little or no coronavirus cases would show some price growth over the next six months, he predicted.
“Prices may grow modestly - or at least outperform other cities - in Perth, Adelaide and Canberra,” Wiltshire said.
“A key reason is the fact there are few Covid-19 cases, or even none, and the economy can reopen and pretty quickly return to some form of normality.”
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