Housing values continued to rise in March but conditions are expected to cool over the coming months as buyers and sellers wait for confidence to return.
The trend in housing values remained positive throughout March, with the CoreLogic national hedonic index rising 0.7% over the month. Although housing values continued to rise, the second half of the month experienced a weakening in the growth trend as confidence slumped and social distancing policies took effect. The national March reading emerged as the lowest monthly gain since the market lifted in July last year.
Although Australia’s housing markets have begun to enter a period of disruption, they are coming from strong foundations.
Over the month, housing values rose across every capital city apart from Hobart (which declined -0.2%), while over the March quarter, every capital city recorded a rise in housing values. Sydney had the highest growth over the quarter with values up 3.9%, followed by Melbourne at 2.9% and Canberra at 1.7%. The lowest quarterly gain was in Darwin and Adelaide, each increasing 0.6%; a similar story occurred across the regional areas of each state with values higher over the month and quarter.
The recent trends in the market have become less relevant as we move into a period of unprecedented uncertainty which is likely to impact further on household confidence and drag Australia’s economy into a recession for the first time in almost 30 years.
Capital growth trends will be contingent on how long it takes to contain the virus, and whether additional constraints on business or personal activity are introduced.
From a transactional perspective, we are expecting the number of residential property sales to fall dramatically over the coming months – a consequence of tanking consumer confidence, a rising jobless rate, and more cautious lending practices.
Considering the temporary nature of this crisis, along with unprecedented levels of government stimulus, leniency from lenders for distressed borrowers and record low interest rates, housing values are likely to more be insulated than sales activity.