Core Logic: national property values fall 0.4% in May

National property values edged lower during May but market watchers were expecting far worse, researcher Core Logic says.

Australia’s success in managing the coronavirus pandemic has meant property values have fallen less than expected, Core Logic reports. Picture: Getty Images

House prices fell by almost half a per cent nationally in May, but property researcher CoreLogic believes the market may remain more resilient to the economic fallout from coronavirus than first thought.

The 0.4 per cent fall in prices last month came as the market began a staggered return to normal selling conditions across the country.

Melbourne’s housing market led the falls, with the total value of all dwellings in the Victorian capital down 0.9 per cent in May. Sydney prices fell for the first time since the crisis began, inching 0.4 per cent lower.

CoreLogic head of research Tim Lawless, said the housing market was looking stronger than had initially been predicted at the start of the pandemic, largely due to the swift containment of coronavirus in Australia.

Key consumer confidence indicators showed a rise through May as social distancing restrictions, including the bans on public auctions and open homes, began to be lifted. The number of homes selling – both privately and under the hammer – also bounced back 18.5 per cent last month after dropping by a third through April.

“I am optimistic in the sense that value falls to date have been very modest,” Mr Lawless said.

 

“As you consider the economic turmoil and lack of certainty we are moving through, a 0.4 per cent fall over the month following relatively stable conditions in April looks like a pretty good outcome for housing values.

“So, I guess the main theme we are seeing here is some resilience.”

Nevertheless, May marked the first time prices have fallen nationally since June last year, ahead of what would become the fastest recovery ever. Among the smaller capital cities during May, Perth values were down 0.6 per cent, Darwin fell 1.6 per cent while Brisbane moved marginally lower by 0.1 per cent. Three capital cities rose, including Adelaide (up 0.4 per cent), Hobart (0.8 per cent) and Canberra (0.5 per cent). Regional prices held steady through the month.

September would signal any significant falls in the housing market as government stimulus and the mortgage holiday offered by banks begins to be wound back, Mr Lawless said. Mortgage arrears and distressed sales were likely to rise, but the extent would be dependent on any broader economic improvements, he said.

“It really depends on how strong the economy bounce back is at that time,” Mr Lawless said.

“If we are seeing some of the slack being taken up in the labour markets, and we are seeing the economy continuing on the current trajectory, then I think that's another really strong and encouraging sign that housing values may be on a much better trajectory than what we originally thought.

But CoreLogic has not revised its position that the market will fall around 10 per cent as a result of coronavirus pressure.

Rents still falling

Capital city rents held largely steady through the month of May, however, the reprieve from falls is unlikely to last. CoreLogic still expects the rental market to fall further than the housing market, as supply continues to outweigh demand.

“Potentially, this is a bit of a pause in rent. In April, we saw pretty broad-based falls in rental rate, s but nothing falling off a cliff. Last month was generally steady,” Mr Lawless said.

“I think over the coming months we probably will see some further downward pressure on rates emanating out of the apartment markets, particularly geographically around the markets of Melbourne, Sydney and Brisbane. I will also throw Hobart in there as well considering there has been a lot of new permanent listings migrating to the long term rental market.”