Australian home estimations moved through a fourth month of COVID-induced falls, with the CoreLogic home value index recording a 0.4% fall in August. Although housing values continued to decline lower from their pre-COVID highs, at least from a macro perspective, the speed of decline has eased over the last two months and five out of eight capitals recorded steady or increasing values through the month.
According to Tim Lawless, CoreLogic's head of exploration, the Melbourne housing market is the primary cause on the headline results. “Following a similar decline in July, Melbourne home values fell by 1.2% in August, the largest fall recorded amongst the capital cities, demonstrating the impact of a worse viral outbreak relative to other cities, along with a larger demand side impact from stalled overseas migration. Through the COVID period to date, Melbourne home values have fallen by 4.6%.”
Outside of Melbourne, the remaining capital cities all registered marginally better conditions relative to July. The rate of decline slowed across Sydney and Brisbane, while home values held or showed a subtle rise across the remaining capitals.
“The performance of housing markets are intrinsically linked with the extent of social distancing policies and border closures which also have a direct effect on labour market conditions and sentiment. It’s not surprising to see Melbourne as the weakest housing market considering the extent of the virus outbreak, and subsequent restrictions, which have weakened the economic performance of Victoria,” Mr Lawless said.
“Looking forward we are likely to see a diverse outcome for housing markets around Australia, depending on how well the virus is contained and the regions exposure to other factors such as its reliance on overseas migration as a source of housing demand.”
Regional markets have continued to outperform capital cities across the largest states. While CoreLogic’s combined regionals index has lost momentum relative to the pre-COVID trend, the index has held virtually flat since May.
Mr Lawless says there are a variety of factors helping to support regional housing market conditions. “Unlike their capital city counterparts, which usually receive 85% of net overseas migration, most regional markets have avoided the drop in demand caused by the pause in migration. Regional markets may also be appealing for their relatively low density and lower price points. The normalisation of remote work through the pandemic could make proximity to major cities less of a factor in home purchasing decisions.”