- Australia property market continues to cool down with CoreLogic Home Value Index (HVI) showing a modest 0.3% rise in October and overall annual growth decelerating to 6%.
- Sydney's median home value fell 0.1%, the first time the capital city posted a decline since January 2023.
- Perth, Adelaide, and Brisbane drive national value growth, though their pace has also begun to slow.
- Weak demand and rising supply keep a lid on prices.
- ABS reveals dwelling approvals rose 4.4% in September.
- Moody's Ratings report reveals mortgage delinquency rates are rising across the country.
Australia's housing market continues to cool down amid increasing supply. However, rising mortgage delinquencies cast doubt on homebuyers' abilities to keep up with repayments.
CoreLogic's Home Value Index (HVI) released on Friday showed dwelling values across the country rose 0.3% in October, slower compared to the 0.4% uplift in the month prior.
Annually, national home values eased to 6%, down from the 6.7% rise through September.
As of 31 October, the national median home value stood at $809,849, increasing only by less than $3,000 from September.
Declining values in Darwin (-1.0%), Canberra (-0.3%), Melbourne (-0.2%), and Sydney (-0.1%) have decelerated the growth across the country.
Interestingly, the fall in Sydney's home values was the first monthly decline since January 2023, according to CoreLogic.
Driving the weaker conditions in the New South Wales capital is the falling prices of expensive homes.
Upper quartile house values over the month fell by 0.6%, and down by 1.1% in the three-month period.
In comparison, Sydney's lower quartile house and unit values both recorded a half per cent rise in October.
CoreLogic's research director Tim Lawless notes that the stronger performance across the more affordable end of the market is a consistent theme across the capital cities.
"A combination of less borrowing capacity and broader affordability challenges, as well as a higher-than-average share of investors and first home buyers in the market, is the most likely explanation for stronger conditions across the lower value cohorts of the market," he said.
Mid-sized capitals continue to drive Australia's property market
The increase in median home values in Perth, Adelaide, and Brisbane has lifted the national average.
Despite leading the pace of value growth, these mid-sized capitals are also losing momentum.
Perth's 1.4% monthly growth in October is down from what was seen earlier in the year when monthly gains were averaging more than 2%.
Adelaide values have risen by more than 1% each month since March, but conditions look to be slowing as well, with October's 1.1% gain marking the lowest monthly rise since June.
Brisbane's monthly gain of 0.7% was the lowest since July.
Rising stock levels put the brakes on home values
As it stands, weak demand and rising supply are keeping the lid on prices.
CoreLogic's rolling four-week count of listings to October 27 shows that advertised inventory has increased 12.7% since the end of winter across the combined capitals, with the largest increase occurring in Perth where listings are 20.6% higher.
In Sydney and Melbourne, where prices are declining, total listings are 13.2% and 13%, respectively, higher than the previous five-year average.
Despite the rise in listings, advertised stock levels across Perth, Adelaide, and Brisbane remain more than 20% below the five-year average for this time of the year.
"These markets remain well and truly in favour of sellers, although the balance is starting to gradually improve," Mr Lawless said.
Alongside the rise in advertised supply, estimates for capital city sales activity over the three months ending October were down 7.5% from three months earlier and 1.6% lower than at the same time last year.
Pretty soon, buyers will have more choice as supply is expected to increase amid the rise in dwelling approvals in September.
ABS building approvals data released on Thursday revealed total dwellings greenlit for construction was up 4.4% in September to 14,842.
Driving this month's rise was the increases across all dwelling types.
Private sector houses approved rose 2.2% to 9,745, the highest level the category has been since August 2022.
SA recorded the largest increase among the states at 10.3%.
Similarly, approved private sector dwellings excluding houses jumped 4.7%, to 4,653 in September, largely due to the rise in approvals for high-density apartments.
There were 1,815 apartments approved in nine or more storey blocks in September, in original terms, compared to 1,201 in August, according to ABS.
"The result seen in house approvals data continues to confirm that the market is past its trough, and more buyers are building a new home, especially in those markets outside of Sydney," HIA economist Maurice Tapang said.
Delinquency rates across Australian states and territories
New Moody's report reveals mortgage delinquency rates are rising across the country, with mounting risks that the trend will continue over the next year.
The report found average home loan arrears rates increased in every state and territory over the year to May.
Delinquency rates measure the percentage of home loans where borrowers are overdue on their scheduled repayments by 30 days.
More borrowers in Tasmania, Victoria, and Northern Territory have been unable to meet their scheduled mortgage repayments over the 12-month period.
In all states and territories, average delinquency rates increased in both capital cities and areas outside major urban centres.
Delinquency rates increased in 74 local areas and declined in only 13, Moody's revealed.
| State/Territory | May 2023 | May 2024 |
|
New South Wales |
1.39% |
1.81% |
|
Victoria |
1.78% |
2.47% |
|
Queensland |
1.31% |
1.62% |
|
Western Australia |
2.10% |
2.32% |
|
South Australia |
1.81% |
1.86% |
|
Tasmania |
1.62% |
2.43% |
|
Northern Territory |
3.02% |
3.70% |
|
Australian Capital Territory |
0.91% |
1.18% |
|
Australia |
1.57% |
2.00% |
Source: Moody's Ratings
And even if the RBA cuts interest rates next year, the credit rating agency doesn't expect the easing policy to have material effect in the near term.
"It will take time for stretched household finances to recover from the strain of high interest rates over the past few years," Moody's analyst Letitia Wong said.
"We expect mortgage delinquency rates will continue to rise around the country over the next year, which is credit negative for Australian residential mortgage-backed securities (RMBS) we rate."
It also expects delinquency rates to have worsened in the months since May.
Melbourne emerges as a mortgage delinquency hot spot
Mortgage holders in Melbourne have had the most difficulty squeezing mortgage repayments in their monthly household budgets.
According to Moody's report, 14 of the 20 suburbs with the highest mortgage delinquency rates in Australia are in Melbourne.
Conversely, many of the suburbs with the lowest mortgage delinquency rates are in Brisbane and Sydney.
Similar to its nationwide prediction, the credit rating agency expects the situation in Melbourne to continue into 2025 due to several reasons.
"The unemployment rate in Melbourne is above the national average, while income growth is below the national average," Ms Wong said.
- Jobs data from the Australian Bureau of Statistics showed unemployment in Victoria (up 4.4%) was higher than in other states in September 2024.
- ABS' wage price index (WPI) revealed wage growth in Victoria (up 3.3%) was below the national average of 4.1% in the June quarter; VIC also posted the slowest growth in wages.
Citing CoreLogic September HVI, Moody's noted:
"The housing market in Melbourne is also softer than other major Australian cities, with median prices declining over the year to September amid an increase in state taxes for investment property owners and a greater supply of housing than other cities," the report read.
During the last month of the third quarter, home prices in Greater Melbourne declined by 1.5%, the steepest drop among capital cities.
"The combination of above-average unemployment, below-average income growth and softer housing market conditions than other major cities means Melbourne is likely to remain a weak spot for mortgage delinquencies over the next year," Ms Wong said.
Photo by Michael Tuszynski on Pexels
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