Overview
- Cotality’s national Home Value Index was flat in May (0.0%), with the housing cycle continuing to weaken across most markets.
- Sydney(-0.9%) and Melbourne (-0.8%) are leading the downturn.
- Perth and Darwin led monthly gains at 1.5%, highlighting multi-speed conditions across the capitals.
- Headwinds are building across the Australian market, with high interest rates, stretched affordability, and tax policy changes tilting toward weaker demand.
Cotality’s national Home Value Index was flat in May, with the housing cycle continuing to weaken across most markets.
Beneath the flat national result, Sydney and Melbourne are leading the downturn, with dwelling values falling by 0.9% and 0.8% respectively in May, to be 2.1% and 2.9% below their cyclical highs in November last year. Home values were also lower across the ACT, down 0.2% in May.
Across the remaining capitals, values continued to rise, although growth is clearly losing momentum. Perth and Darwin led the monthly gains at 1.5%, followed by Brisbane and Hobart at 0.9%, while Adelaide recorded a 0.5% rise.
Home Value Index
Cotality research director, Tim Lawless, said this level of diversity has been a defining feature of housing conditions over the past five years. “We are continuing to see multi-speed conditions across Australia’s housing sector, with Perth and Melbourne at opposite ends of the spectrum. The past five years have seen these cities diverge sharply, with Perth values up a stunning 91.4% while Melbourne home values are only 3.3% higher since May 2021.”
“While the speed of value change remains very different from city to city, the direction is becoming more consistent, with most markets losing momentum as demand-side headwinds intensify.”
This loss of momentum had been building for some time, well before interest rates started to rise, conflict escalated in Iran and taxation changes were announced in the Federal Budget. Most cities recorded a peak in value growth through spring last year as affordability and serviceability constraints increasingly weighed on housing demand.
Lower price tiers continue to show stronger or more resilient conditions than the higher price tiers across most of the capitals, although the pace of growth is generally easing across the more affordable markets as well.
“Some cities are now recording falls across the lower quartile, including Sydney and Melbourne’s lower quartile houses, as well as both house and unit values across Canberra’s lower quartile,” said Mr Lawless.
Alongside easing values, the slowdown in housing demand is also evident in lower home sales. Nationally, the estimated number of home sales over the past three months was tracking 2.2% lower than a year ago and 4.1% below the five-year average.
“The largest drop in estimated sales can be seen in Sydney and Melbourne, down 17.0% and 14.2% on levels a year ago,” said Mr Lawless. “These are also the cities where advertised supply has risen to above average levels, providing more choice and better leverage for buyers.”
Selling conditions have also softened as demand and supply levels rebalance. The weighted average clearance rate across the capitals was close to 50% through the second half of the month, while listings are trending higher across most markets.
Regional markets have shown greater resilience, with housing values rising 0.6% across the combined regionals in May, although conditions are slowing here as well. The monthly rise was the smallest in a year and, similar to the capitals, growth is continuing to ease.
All the broad rest-of-state markets continue to record a positive trend in home values. Regional WA led the monthly gains at 1.9%, while the smallest monthly rise was in regional NSW at 0.2%.
