key takeaways

Key takeaways

Sydney and Melbourne have been the first capital city housing markets to record negative monthly growth rates this year.

But within those cities as well as Australia’s other capital cities, micro-market trends are emerging, coinciding with higher interest rates, rising stock levels, lower confidence, and a limit to how much buyers are willing or able to spend.

The suburbs with the lowest value growth are mostly in Sydney, Melbourne and Canberra.

The upper quartile of our property markets has softened more visibly than the middle to lower end.

Brisbane suburbs are performing well, with values up 29.8% in the year to April.

Sydney and Melbourne have been the first capital city housing markets to record negative monthly growth rates this year, joined most recently by Hobart in April, its first fall after 22 consecutive months of growth.

But within each of those areas as well as Australia’s other capital cities, micro-market trends are emerging, coinciding with higher interest rates, rising stock levels, lower confidence, and a limit to how much buyers are willing or able to spend.

Suburbia

The suburbs which recorded the lowest quarterly change in value growth for the three months to April highlights predominantly inner-city and upper quartile suburbs found in Sydney, Melbourne and Canberra.

In cities still recording an upswing in values such as Brisbane, underperforming suburbs are more skewed toward high-density areas weighed down by a high proportion of units.

In Adelaide and Perth, suburbs that may be classified as unaffordable dominated the list.

Most of the areas identified registered upper quartile housing values, with a median well in excess of the broader region.

We are seeing this trend more broadly, where the upper quartile of the market has softened out more visibly than the middle to lower end of the market.

These softer conditions come after a stronger performance across the premium end of the market through the growth phase.

Historically more expensive housing markets tend to lead the upswing, but also lead the downturn, which is what we seem to be seeing at the moment.

Exceptions to the upper quartile trend can be found among Brisbane suburbs.

The city as a whole remains in an upswing phase, with values up 29.8% in the year to April.

However, among the growth are sectors of the market that haven’t performed as well, such as higher density inner ring suburbs including South Brisbane and West End where slight falls in values were recorded in the last three months.

In Darwin, a handful of the city’s more affordable suburbs are ranked lowest for growth rates possibly due to fewer constraints on housing affordability.

The dwelling value to income ratio in Australia’s top end is far lower, at 3.9, relative to other capital cities, which could be underpinning demand among buyers upgrading.

Quarterly Change In Dwelling Values Combined Capitals

Ahead of CoreLogic’s monthly Home Value Index to be released on June 1st, Head of Research Eliza Owen said in a downturn, expensive, and more leveraged suburbs were sensitive to changes in credit conditions.

She said while the characteristics had long been observed in the real estate sector, the RBA also published similar research insights in 2020.

Ms Owen further explained:

Higher-income households tend to hold more housing debt to income, so do property investors. 

That’s why the high end of the market can often be more sensitive to changes in interest rates or credit conditions, but this can also affect some other popular investment markets like inner city areas.

The biggest common factor across Sydney and Melbourne, and house markets in these cities more broadly, is the potential for higher volatility among more expensive pockets.

Further, Ms Owen said:




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