CoreLogic has released its full dwelling value results for July, which shows that values nationally fell by 1.3%, with price falls recorded across five capital cities and the combined regions:
As already documented, Sydney and Melbourne led the price falls on both a monthly and quarterly basis. In fact, Sydney’s price decline is the sharpest in around 40 years.
Quarterly dwelling values are now falling across both the combined capital cities (-2.6%) and the combined regions (-0.2%):
Commenting on the results, CoreLogic research director Tim Lawless noted that “housing market conditions are likely to worsen as interest rates surge higher”:
“It’s abundantly clear markets have weakened quite sharply since the first rate rise on May 5”.
“Although the housing market is only three months into a decline, the national Home Value Index shows that the rate of decline is comparable with the onset of the global financial crisis (GFC) in 2008, and the sharp downswing of the early 1980s. In Sydney, where the downturn has been particularly accelerated, we are seeing the sharpest value falls in almost 40 years”.
“Due to record high levels of debt, indebted households are more sensitive to higher interest rates, as well as the additional downside impact from very high inflation on balance sheets and sentiment.”
However, while dwelling values are tanking, rents continue to boom. Rents nationally rose another 0.9% in July to be up 2.8% over the quarter and 9.8% higher year-on-year:
“Rental markets are extremely tight, with vacancy rates around 1% or lower across many parts of Australia. The number of rental listings available nationally has dropped by a third compared to the five-year average, with no signs of a lift in rental supply. On top of already tight rental supply, it’s likely demand will continue to increase as overseas arrival numbers climb,” Mr Lawless said.
“Such widespread and rapid rental growth is likely to remain one of the key domestic factors pushing up inflation, along with construction, food, transport and energy costs. While some of these can be attributed to global supply chain issues, the rental situation is a domestic one caused by a combination of tight supply and amplified demand”.
Thus, owner-occupied mortgage holders are getting crucified by soaring mortgage rates at the same time as renting households are being squeezed hard by soaring rents.
Property investors are relatively well placed, however, since they are enjoying higher income growth via rents while any increase in mortgage costs is tax deductible.