With the recent growth phase well behind us across most regions of the country, attention is squarely focused on how much housing values could fall before levelling out.
With the recent growth phase well behind us across most regions of the country, attention is squarely focused on how much housing values could fall before levelling out. After CoreLogic’s national Home Value Index (HVI) surged nearly 29% through the recent growth phase, the full extent of how far housing values will fall remains highly uncertain and largely dependent on the trajectory of interest rates.
Since the national monthly HVI peaked in April, dwelling values are down 4.8% to the end of September, ranging from a 9.0% fall from peak in Sydney, to Darwin, where home values remain at a cyclical high.
Mainstream forecasts for a peak to trough decline also vary remarkably, but generally range from around 15% to 25% across the combined capital cities. For context;
The risk of housing values returning to pre-COVID levels varies from region to region.
Across the capital cities, arguably Melbourne’s housing market is most vulnerable; a further 4.3% slide in dwelling values would take Australia’s second largest city back to March 2020 levels.
This vulnerability isn’t due to housing prices falling faster than other cities, in fact Melbourne’s quarterly rate of decline, at -3.7% through the September quarter, was a milder rate of decline compared with Sydney (-6.7%), Brisbane (-4.3%), Hobart (-4.5%) and Canberra (-4.4%). Melbourne simply didn’t see as much growth in values through the upswing, with a 17.3% rise from the COVID trough to peak. This comparatively modest rise in values means Melbourne home values don’t need to fall as far as other capitals before wiping out all of its COVID gains.
At the other end of the spectrum, Adelaide’s housing values surged through the growth phase and, since peaking in July, have held reasonably firm. The market would need to drop by almost 31% before values in the City of Churches returned to pre-COVID levels.