Is the housing market losing momentum

National home values rose 13.5% over the financial year, but a loss of momentum is becoming apparent, according to new data from CoreLogic. Home values rose 1.9% in June nationally, bringing annual growth to 13.5% for the financial year, according to CoreLogic. The growth was driven primarily by houses, which posted price gains of 15.6% over the year. Units posted a 6.8% rise in value.

"This is the highest annual growth rate seen across the Australia residential property market since April 2004, when the early-2000s housing boom was winding down after a period of exceptional growth," said Eliza Owen, CoreLogic head of research for Australia. "However, there are some markets where performance is starting to ease more notably."

All capital cities saw a rise in dwelling values last month, from a 3% spike in Hobart to a 0.2% lift in Perth. The performance gap between regional Australia and the capital cities has narrowed, according to CoreLogic. However, regional Australia did outperform slightly month over month, rising 2% in June compared to 1.9% for the combined capital cities.

Darwin had the highest annual growth rate among the capital cities, with a 21% spike in value over the year, followed by Hobart at 19.6%. Among the regions, regional New South Wales led the pack with an annual growth in dwelling values of 21.1%, followed by regional Tasmania at 20.8%.

Owen said that the growth was driven by strong demand-side factors.

"Before the recent uncertainty of growing COVID-19 case numbers, there were plenty of demand-side factors driving housing market growth through the first half of 2021," she said. "In May, the unemployment rate fell to 5.1% and the under-utilisation rate fell to 12.5%, the lowest level since February 2013. Consumer confidence remained elevated through June, although down from the recent April highs. Elevated savings accumulated through COVID restrictions last year, along with a more confident consumer sector, has encouraged consumption of larger goods such has housing. This has all occurred against a backdrop of continued low mortgage rates, which is one of the most significant demand drivers."

However, there are signs that the market is starting to cool, according to CoreLogic. The monthly rise in home values of 1.9% is well above the decade average of 0.4%, but is down 30 basis points from March. The only capital city to see a further increase in the monthly growth rate was Canberra, where dwelling values increased 2.3% in June compared to 1.7% in May.

In the capital cities, the loss of momentum was most evident in Perth and Darwin. The monthly price-growth rate in Perth averaged 1.4% between January and May, but fell to 0.2% in June. In Darwin, the average growth rate was 2.1% between January and May, but just 0.8% in June.

"The key to understanding the softer performance in these resource-based markets may be a slightly different supply-demand dynamic compared to the other capital cities and regions," Owen said. "CoreLogic monitors a 'sales to new listings' ratio, which divides the monthly volume of settled sales by new listings brought to market. For the past three month, the sales to new listings ration has averaged 1.1 across Darwin and Perth. While the implication is that there is 1.1 sales for each new listing, which would be enough to elicit further growth in dwelling values, these are the lowest sales to new listings results of the capital city markets."