Melbourne is set to lead a further plunge in capital city property prices in July, as investor-driven apartments fall out of favour and demand for houses in regional areas surges.
Preliminary data from CoreLogic’s hedonic index, which will be released on Monday, shows the five-city aggregate index down 0.8 per cent over the month and 2.2 per cent from its recent peak.
The data is set to show a fall in values of about 1.1 per cent in Melbourne, 0.8 per cent in Sydney, 0.1 per cent in Brisbane and the Gold Coast, and 0.6 per cent in Perth. Adelaide prices were steady over the month. Data for Canberra, Hobart and Darwin was not available.
“The early read on the market suggests the rate of decline may have eased slightly compared with last month, however we aren’t seeing any sign that housing values are turning around or moving back into positive growth territory, at least from a macro-perspective,” CoreLogic’s head of research, Tim Lawless, said.
Buyer’s agent Lauren Goudy said poorly performing investor stock in Sydney was dragging down the rest of the market.
“The area where it is difficult for properties to move at the moment is apartments under $1 million. The reduced number of tenants means rents have come back and if owners can’t find a tenant, those properties are being listed for sale, so there is an oversupply of very ordinary units,” said Ms Goudy, of Rose & Jones.
“Houses, on the other hand, are performing very well. Even in the past two months the number of people attending house inspections has increased significantly. The numbers aren’t reducing, it just keeps getting busier.”
Ms Goudy estimated that pockets of Sydney – some neighbourhoods in the inner west, northern beaches and eastern suburbs – had price growth of 10 per cent in the past three months, with competition for properties driving prices up.
“The other market performing very strongly are regional spots, like around Byron Bay. Prices there have probably jumped 10 or 15 per cent because as more people are working remotely they are saying ‘let’s get out of our units and work elsewhere where we have more space’,” Ms Goudy said.
Regional property markets, which tend to be more affordable and more insulated from economic shocks, have significantly outperformed city markets on average over the past year, up by an average of 3.4 per cent to the end of June, new research by PRD Real Estate says.
In Canberra, prices have been holding firm, indicating buyers are untroubled by the economic uncertainty being felt more acutely elsewhere.
Bill Lyristakis, of Berkely Property, who recently listed a two-bedroom designer penthouse with $3.6 million-plus expectations – which would make it one of Canberra’s most expensive apartments – said the market had been “surprisingly resilient” given the pandemic.
“Buyers, many of them public servants and government contractors with secure incomes, don’t seem to have the same concerns about the economy elsewhere, like in Melbourne and Sydney, and are still out in force as normal looking for properties and taking advantage of record low interest rates and low stock levels,” Mr Lyristakis said.
Despite the data showing price falls in Melbourne, selling agent Jeremy Rosens, of Gary Peer & Associates, said he had not seen a major shift in values in any part of the market. “Our stock levels are lower and demand has been significant, so we are still making pretty significant sales across most markets,” Mr Rosens said.
“Where you might see discounted stock are modern apartments that are only a few years old that were bought off the plan for fairly high prices at the time and are now not being able to be rented and needing to be sold.”
Despite record low interest rates, heightened uncertainty and elevated unemployment is having an impact on borrowing activity. The latest RBA figures show housing credit inched higher by 0.2 per cent in June, driven by owner-occupier lending, which rose a paltry 0.3 per cent – the weakest growth rate in 12 months. Investor housing finance was flat over the month and 0.7 per cent lower than a year ago.
“With our expectation for unemployment to rise even further and wage growth to remain subdued, we anticipate housing credit growth will continue to slow and then turn negative over the next 12 months,” ANZ economists Hayden Dimes and David Plank said.