Housing Value declines have eased in September, according to the CoreLogic Home Value Index September report. The spring season saw a national Home Value Index (HVI) decline of -1.4% in September, this shows there is an easing of the rate of decline from a -1.6% fall in August.

CoreLogic’s research director, Tim Lawless, says it is probably too early to suggest the housing market has moved through the worst of the downturn. “It’s possible we have seen the initial shock of a rapid rise in interest rates pass through the market, and most borrowers and prospective home buyers have now ‘priced in’ further rate hikes. However, if interest rates continue to rise as rapidly as they have since May, we could see the rate of decline in housing values accelerate once again.”

Tim Lawless Executive, Research Director, Asia-Pacific - CoreLogic Australia

The reduction in the rate of the decline came alongside an improvement in other indicators. “Auction clearance rates also trended upwards, albeit subtly, in September, and consumer sentiment nudged a little higher as well on the back of strong labour market conditions,” Mr Lawless said. “We’ve also seen the flow of fresh listings continue to slide through the first month of spring, which is uncommon for this time of the year.”

Tim Lawless Executive, Research Director, Asia-Pacific - CoreLogic Australia

We can see in the above graph that the market in Sydney and Melbourne has leveled since the pandemic peak (PP). One key contributor is that there is a lack of fresh stock on the market. Sydney is HVI has dropped -9% and Darwin has recorded a decline of -10.1% since its PP.

The is a considerable lack of fresh stock on the market with 22,152 new listings over the four weeks ending 25th of September -12.0% below this same time last year and -10% below the 5yr average. There are 80,663 active listings over the four-week period ending in 25th September 7% above the same time last year and -15.1% below the 5yr average.

We saw the lowest national rental index increase of 0.6% in September, since December 2021. At the national level, rental growth moved through a peak in May 2022 with a 1.0% rise; since that time, the monthly pace of rental growth has been easing. This trend in rents is evident across most regions but has been clearest across regional Australia, where monthly rental increases have reduced from a peak of 1.4% in January 2021 to just 0.3% in September 2022. The slowdown in rental growth is surprising considering the low rates of rental vacancy and the increase of overseas migration. It is to be noted that there has been an uptick in vacancy rates across some regions.

“A gradual slowdown in rental growth in the face of such low vacancy rates could be an early sign that renters are reaching an affordability ceiling. Since the onset of COVID, capital city rents have risen 16.5% and regional rents are up 25.1%. It’s likely renters will be progressively seeking rental options across the medium to high density sector, where renting is cheaper, or maximising the number of people in the tenancy in an effort to spread higher rental costs across a larger household,” Mr Lawless said.

There is a shift away from homes back to more affordable units, with the above graph trending high with Melbourne leading the way with;

1. Melbourne 13.4%

2. Sydney, 12.3%

3. Brisbane, 11.9%

4. Adelaide, 11.7%

5. Perth, 7.7%

6. Hobart, 7.3%

7. Darwin, 5.5%.

Have we hit the bottom of the market?

The decline in the market has definitely slowed. The biggest factor may be the lack of stock on the market, -12% since this time last year is offsetting the pressure from the interest rate increases. CoreLogic Australiua Auction Clearance Rates in September have improved since August. The Reserve Bank of Australia only issued a .25% increase in the Cash Rate, slowing from the four consecutive .5% of increase rate increases since May 4th. It is to be said that we are anticipating a few more interest rate rises before the end of the year. However, there are a few interesting indicators that might have a clue to this answer. Adam Kingston’s blog on Interest Rates, Interesting Times

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