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CoreLogic Home Value Index: Value declines flatten as low advertised stock levels keep a floor under prices

Tim Lawless

 MAR 1, 2023

CoreLogic’s Home Value Index (HVI) recorded a sharp reduction in the rate of decline through February.

The national index declined -0.14% over the month, the smallest monthly fall since May 2022 (-0.13%), when rate hikes commenced.

A 0.3% rise in Sydney dwelling values was the most significant driver of the national deceleration, however, the loss of downwards momentum was broad-based. Darwin (-0.3%) was the only capital city to record a steeper monthly fall in February, albeit from relatively flat conditions previously. Every other capital city except Hobart (-1.4%) saw housing values fall by less than half a per cent over the month.

CoreLogic’s research director, Tim Lawless, said the stabilisation in housing values over the month coincides with consistently low advertised supply levels and a rise in auction clearance rates.

“The past four weeks have seen the flow of new capital city listings tracking -17.0% lower than a year ago and -11.9% below the previous five-year average,” Mr Lawless said.  “This trend towards a below average flow of new listings has been evident since September last year, coinciding with a loss of momentum in the rate of value decline.”

Auction clearance rates also bounced back through February, with the capital city weighted average reaching the high 60% range through the second half of the month, while Sydney clearance rates rose to above 70% in the week ending 19 February, the first time since February 2022.

Bottom of the cycle or eye of the storm?  Whether this improving trend can be sustained is highly uncertain.  While listings currently remain low, we could see housing demand dented further under higher interest rates and lower sentiment.

“Considering the RBA’s move to a more hawkish stance at the February board meeting, along with an expectation for a weaker economic performance and a loosening in labour markets, there is a good chance this reprieve in the housing downturn could be short-lived,” Mr Lawless said.  “We also have the fixed-rate cliff ahead of us; arguably the full impact of the aggressive rate hiking cycle is yet to play out.”

Drilling into the data by value segment, the upper quartile of the combined capital city housing market drove this month’s stabilising trend, increasing by 0.1% in February. While still falling, declines across the lower value segments of the market also stabilised, down -0.1% across the lower quartile and -0.3% across the broad middle of the market.

This trend was most obvious across Sydney’s upper quartile, which recorded a 0.7% rise in values over the month, compared with a -0.2% fall in values across the lower quartile of the Sydney market.

Upper quartile housing values have led the downturn to date, dropping -13.5% in value across the combined capital cities over the past 12 months, compared with a 1.7% rise in values across the lower quartile. Previous cycles have seen a similar trend, where the upper quartile tends to lead both the upswing and the downturn.

Regional dwelling values were down -0.3% in February compared with a -0.1% fall across the combined capital cities. However, the weaker regional result relative to the combined capitals was mostly a factor of the monthly rise in Sydney housing valuesrather than a larger fall in regional market values. Each of the broad rest-of-state regions, apart from NSW, recorded a monthly outcome that was inline or stronger relative to their capital city counterparts.

Since peaking in June last year, the combined regionals index is down -7.7%, compared with a -9.7% drop in the combined capital cities index, which peaked slightly earlier in April 2022.  Regional housing values remain 30.7% above levels recorded at the onset of COVID in March 2020, while the combined capitals index is 10.4% higher.

Dwelling values remain higher than they were at the onset of COVID across every capital city and broad rest-of-state region.  Melbourne now has the smallest value buffer, with housing values virtually equal to March 2020 levels (currently sitting just +0.03% higher), followed by Sydney, where dwelling values remain 7.7% higher.  At the other end of the spectrum is Regional SA (47.6%) and Adelaide (41.4%), where housing values surged through the upswing and have remained relatively resilient to value falls through the rate hiking cycle to-date.

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