National upswing in home values is all but over with values rising just 0.1% in November

CoreLogic’s national Home Value Index (HVI) rose by just 0.1% in the last month of spring, the weakest Australia- wide result since January 2023.

This marks the 22nd straight month of growth, but it could be close to the last in this cycle.

 

The downturn is gathering momentum in Melbourne and Sydney.

 

Meanwhile, the mid-sized capitals, which have dominated the growth cycle of late, are also losing steam.

 

Melbourne, where housing values have fallen over ten of the past twelve months, recorded a -0.4% fall over the month, taking values -2.3% lower over the past year.

 

For Sydney, September likely marked the peak of the cycle, with values falling consecutively in October (-0.1%) and by a larger -0.2% in November.

 

On a rolling quarterly basis, we are now seeing four of the eight capitals record a fall in values, led by Melbourne (- 1.0%) and joined by Darwin (-0.7%), Sydney (-0.5%) and Canberra (-0.3%).

The mid-sized capitals and most of the regional ‘rest of state’ markets continue to provide some support for growth in the national index, but it is clear momentum is also leaving these markets.

 

Perth’s pace of capital gain continues to lead the nation, with values up 1.1% over the month and 3.0% higher over the rolling quarter, however, this was the softest rise over a rolling three-month period since April 2023 and is less than half the rate of growth recorded through the June quarter (6.7%).

 

Similarly, Brisbane’s quarterly rate of growth has eased back to 1.8%, the slowest pace of gains since March 2023, while Adelaide’s 2.8% rise in values over the past three months was the smallest outcome since June 2023.

 

Outside of the capitals, regional housing trends have been a little stronger, with the combined regional index rising 1.1% over the past three months compared with a 0.3% lift across the combined capitals.

That being said, like the capital city trends, there is significant diversity, with regional Victoria weighing on the headline numbers, down -0.9% over the rolling quarter, while every other ‘rest of state’ region continued to record a mild rise, led by regional WA up 3.3%.

 

Weaker housing conditions have been accompanied by a rebalancing in available supply

Vendor activity lifted through spring.

 

Based on the volume of houses and units advertised for sale over the four weeks ending November 24th, capital city listings are up 16% since the end of winter, with Perth (+33%) and Adelaide (+25%) recording the largest lift in advertised stock levels through the spring season, albeit from an extremely low base, with total listings remaining well below average in these cities.

 

Sydney and Melbourne's listings are now tracking 10.4% and 9.1% above their previous respective five-year averages, to be at their highest level for this time of the year since 2018.

 

At the same time, purchasing activity looks to be winding down

CoreLogic’s estimate of capital city home sales over the past three months is -4.6% lower than a year ago and - 2.0% below the previous five-year average.

 

The largest drop in the volume of home sales has been in Sydney, where sales over the rolling quarter were estimated to be -15.4% lower than a year ago and -15.1% below the previous five- year average.

 

With more available supply and less purchasing activity, selling conditions have deteriorated through spring.

 

The combined capitals auction clearance rate has held below the 60% mark since mid-October, and median selling times are trending higher for private treaty sales.

 

Housing markets are likely to be arriving in 2025 on a relatively weak footing

Value growth losing steam or falling, advertised stock levels rising, unaffordability is at record highs and demand is no longer keeping pace with the flow of new listings coming to market.

 

There may be some exceptions emerging through 2025, with the Westpac-MI consumer sentiment findings recording an increase in buyer confidence across Victoria.

 

In Tasmania, where home values have flatlined for the past two years, home sales have trended slightly higher through spring relative to a year ago.

 

Uncertainty is the only certainty

Rising levels of geopolitical risk add to the uncertainty of the 2025 outlook, including wars in the Middle East and Ukraine as well as the implications of a new Trump presidency yet to become clear.

 

Additionally, a federal election is around the corner which is likely to feature housing policy front and centre, adding to the complexity.

 

An undersupply of newly built housing is likely to provide some support for housing values

Although population growth is expected to ease further in 2025, a cumulative undersupply of housing has accrued across Australia following the record levels of population growth since international borders re-opened.

 

The residential construction sector continues to face feasibility hurdles in getting new housing stock to market, with materials and labour costs having surged over the past five years.

 

Construction costs aren’t rising as rapidly as they were through the pandemic, but they are still increasing at around 1% a quarter.

 

Significant competition from major public sector infrastructure projects is likely to keep prices for labour and materials high across the residential construction sector.

 

Given the highly ambitious target to build 1.2 million homes by mid-2019, the potential for new supply-side stimulus policies aimed at kickstarting residential construction activity is highly likely in 2025.