National property values fell one per cent in January 2019 with Sydney and Melbourne seeing record-breaking falls.
The latest figures from CoreLogic show a grim start for the 2019 property market which has declined 6.1 per cent overall since the market peaked in October 2017.
Melbourne dwelling values fell four per cent, the largest quarterly fall on record.
Sydney values fell 4.5 per cent over the last three months – the largest fall since 1983 on a quarterly basis.
Cameron Kusher, CoreLogic’s head of research said the fall in values shows no signs of abating.
“The falls are definitely accelerating, particularly in Sydney and Melbourne, we saw a 1.3 per cent fall over the month in Sydney and 1.6 in Melbourne.”
The figures show the weakness in values is now spreading across the country.
Perth dwelling values were down 1.1 per cent in January and Darwin dipped 1.7 per cent.
Brisbane house prices fell 0.3 per cent and Hobart values fell 0.2 per cent.
Adelaide prices are now also following suit, down 0.3 per cent. This is after the city’s home values saw a 0.2 per cent rise in prices in the December 2018 quarter. Still, annual growth for Adelaide house prices is positive at 0.9 per cent.
Canberra bucked the trend as the only capital city which recorded a rise, seeing a 0.2 growth in values. Canberra housing has performed well over the year, with house prices up by 3.8 per cent.
This is largely driven by demand from government and defence workers and strong population growth from interstate migration into the ACT.
“I think Canberra is a very different market because land release is controlled by the local government,” Kusher said.
“It’s not really a free-for-all for developers like some other state and territories can be.”
But Canberra’s success might be shortlived, as Kusher noted the market generally slows down in the lead up to a federal election, plus a glut of stock on the market at the moment could stagnate price growth.
How much further will capital city values fall?
CoreLogic initially predicted Sydney and Melbourne house prices to fall 15 per cent, but with Sydney already down 12.5 per cent, it adjusted forecasts to a 20 per cent decline.
Despite the drop in house prices, Kusher said affordability is still an issue.
“Even if we get 20 per cent falls, it’s only going to take values in Sydney and Melbourne back to early 2015 levels.
“People were howling back in 2015 that housing was unaffordable in Sydney and Melbourne.
The rate of value falls for the rest of 2019 will be shaped by credit policy and the banking royal commission report, which will be handed down on Monday.
While January is typically a quiet month for real estate sales, the decline follows the housing market’s trajectory from the end of 2018, which saw the sharpest drop in values since the GFC.
And after a six to seven-year cycle of massive house price growth, it’s only natural prices would taper off. What is worrying with the current pullback, Kusher said, is it’s being driven by credit policy, whereas normally a pullback is driven by higher interest rates or an economic slowdown.
“The other challenge is if that does feed into a slowdown in retail trade and consumer expenditure, you get the slowdown in the broader economy, and you might start to see a bit of an increase in unemployment rates,” he said.