{"id":2009,"date":"2022-03-01T23:46:12","date_gmt":"2022-03-01T23:46:12","guid":{"rendered":"https:\/\/royabhishek.in\/urbanbuyer\/house-prices-only-rose-0-6-in-february\/"},"modified":"2022-03-01T23:46:12","modified_gmt":"2022-03-01T23:46:12","slug":"house-prices-only-rose-0-6-in-february","status":"publish","type":"post","link":"https:\/\/royabhishek.in\/urbanbuyer\/house-prices-only-rose-0-6-in-february\/","title":{"rendered":"House prices only rose 0.6% in February"},"content":{"rendered":"

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CoreLogic\u2019s national Home Value Index (HVI) posted a 0.6% gain in February, the 17th consecutive monthly increase in the national HVI.\u00a0 \"Melbourne\"<\/strong><\/p>\n

While housing values are generally rising, the pace of growth in the national index has trended downwards since April last year.<\/p>\n

February\u2019s growth of 0.6% marks the lowest monthly growth reading since October 2020 and is down from 1.1% in January and a cyclical peak of 2.8% in March 2021.<\/p>\n

Every capital city and broad \u2018rest of state\u2019 region is now recording a slowing trend in value growth, albeit with significant diversity.<\/p>\n

\"Index\"<\/p>\n

Sydney and Melbourne have shown the sharpest slowdown, with Sydney (-0.1%) posting the first decline in housing values since September 2020, while Melbourne housing values (0.0%) were unchanged over the month, following similar results in December (- 0.1%) and January (+0.2%).<\/p>\n

Conditions are easing less noticeably across the smaller capitals, especially Brisbane, Adelaide, and Hobart, where housing values rose by more than 1% in February.<\/p>\n

Similarly, regional markets have been somewhat insulated to slowing growth conditions, with five of the six rest-of-state regions continuing to record monthly gains in excess of 1.2%.<\/p>\n

The stronger housing market conditions in Brisbane and Adelaide <\/strong>can be seen in the quarterly growth figures<\/strong>, with Brisbane housing values rising 7.2% over the past three months to February, while Adelaide is up 6.4% over the same period.<\/p>\n

\"Three<\/p>\n

At the other end of the capital city growth spectrum, Melbourne\u2019s values are 0.2% higher over the past three months while Sydney\u2019s values have risen by 0.8%.<\/p>\n

With the trend in housing values losing pace over the past 11 months, the annual growth trend turned in February.<\/strong><\/p>\n

home values were 20.6% higher over the past 12 months, down from what is likely to be the peak rate of annual growth recorded at 22.4% last month.<\/p>\n

Regional Australia continues to record a substantially higher rate of growth than the capital cities.<\/span><\/h2>\n

Over the past three months, housing values across the combined rest-of\u2013state regions increased at more than three times the speed of housing values across the combined capital cities; 5.7% and 1.8% respectively.<\/p>\n

Although the rolling quarterly rate of value growth remains rapid across regional Australia, conditions have eased from a recent peak of 6.4% over the December quarter and are down from a cyclical peak of 6.6% recorded in April last year.<\/p>\n

Regional housing markets aren\u2019t immune from the higher cost of debt as fixed-term mortgage rates rise.<\/p>\n

\"Regional\"<\/p>\n

These markets are also increasingly impacted by worsening affordability constraints as housing prices consistently outpace incomes. <\/p>\n

However, demographic tailwinds, low inventory levels, and ongoing demand for coastal or treechange housing options are continuing to support strong upwards price pressures across regional housing markets.<\/p>\n

The slower growth conditions in Australian housing values go well beyond the rising expectation of interest rate hikes later this year.<\/p>\n

The pace of growth in housing values started to ease in April last year, when fixed-term mortgage rates began to face upwards pressure, fiscal support was expiring and housing affordability was becoming more stretched.<\/p>\n

With rising global uncertainty and the potential for weaker consumer sentiment amidst tighter monetary policy settings, the downside risk for housing markets has become more pronounced in recent months.<\/p>\n

\"Change<\/p>\n

Advertised inventory levels help explain the divergence in housing growth trends.<\/span><\/h2>\n

Nationally, the total number of properties advertised for sale over the four weeks ending 27 February was 13.3% lower than the same period a year ago, demonstrating an ongoing shortage of available housing to purchase, at least at the macro-level.<\/p>\n

Despite the low total listing count, advertised supply levels are gradually normalising after tracking close to 25% below the prior years\u2019 level before spring 2021.<\/p>\n

\"New\"Total<\/p>\n

While some cities, such as Melbourne and Sydney, have seen advertised stock return to more normal levels, other Australian capitals are continuing to record extremely low inventory.<\/p>\n

In Melbourne advertised stock levels are now above average, tracking 5.5% higher than a year ago and 4.7% above the previous five-year average.<\/p>\n

The trend is similar but not quite as advanced in Sydney, with total advertised stock 6.3% higher than last year but still 4.2% below the previous five-year average.<\/p>\n

\"Adveritised<\/p>\n

More choice translates to less urgency for buyers and some empowerment at the negotiation table.<\/span><\/h2>\n

The cities where housing values are rising more rapidly continue to show a clear lack of available properties to purchase.<\/p>\n

Total listings across Brisbane and Adelaide remain more than 20% lower than a year ago and more than 40% below the previous five-year average.<\/p>\n

Similarly, the combined rest-of-state markets continue to see low advertised supply, 24.9% below last year and almost 45% below the five-year average.<\/p>\n

The trend towards higher overall stock levels in some cities can be attributed to a combination of more newly <\/em>listed properties coming to market coupled with a softening in demand caused by worsening affordability, higher mortgage rates, and lower levels of housing-related sentiment.<\/p>\n

The flow of newly listed properties was 11.3% higher than a year ago in February and 1.7% above the previous five-year average.<\/p>\n

The pace of rental growth has shown a subtle rebound over the past two months<\/strong>, which can partially be attributed to the seasonal strength in rental markets through the first quarter of the year.<\/p>\n

Nationally, CoreLogic\u2019s rental value index, which utilises a hedonic regression methodology similar to the HVI, was up 0.8% in February, holding firm from January (0.8%) and up from the 0.6% growth recorded in December.<\/p>\n

\"Change\"Change<\/p>\n

The February rise in rents was focused within the unit market <\/strong>with the national unit rental index up 0.9% over the month and 2.4% higher over the rolling quarter compared to +0.7% and 2.0% for houses respectfully.<\/p>\n

This stronger trend in unit rents is most visible in Sydney and Melbourne.<\/p>\n

Anecdotally, demand for unit rentals in these cities has been bolstered by a combination of worsening rental affordability deflecting more demand towards the higher density sector, where rents tend to be lower and demand starting to return from overseas arrivals.<\/p>\n

With the pace of growth in housing values softening while <\/strong>rental growth holds reasonably firm, the gross yield profile has <\/strong>finally stabilised at 3.2%, <\/strong>the lowest rate on record.<\/p>\n

Sydney (2.4%) and Melbourne (2.8%), which have the lowest yield profiles, recorded a slight strengthening in gross yields this month, as rental growth nudges higher than growth in housing values.<\/p>\n

\"Rental<\/p>\n

We could be seeing rental yields moving through the bottom of their cycle.<\/h3>\n

After several years of yield compression where gross rental yields reached historic lows across most of Australia\u2019s capital cities, we are finally seeing early evidence of yield repair.<\/p>\n

If rents continue to rise faster than housing values, which is a strong possibility in Sydney and Melbourne, yields will continue to improve.<\/p>\n

Cities such as Brisbane and Adelaide, where housing values are still consistently rising faster than rents, are likely to see yields compress to new record lows.<\/p>\n

Despite the downwards trend, yields in these cities remain well above Sydney and Melbourne levels.<\/p>\n

Since the onset of the pandemic in March 2020 Australian<\/h3>\n

housing values have risen by 24.6% <\/strong>adding, on average, roughly<\/p>\n

$144,000 to the value of an Australian dwelling. Such a high rate of capital gain in a period of low-income growth can be explained by many factors, including:<\/p>\n