Cotality’s latest Home Value Index (HVI) fell 0.4% over the month, the biggest decline since December 2022.\u00a0<\/p>\n
This follows May’s flat growth (0.0%) and April\u2019s slowdown (0.3%), bringing the values down 0.7% over the June quarter, indicating the market has turned after peaking in March.\u00a0<\/p>\n
The largest drag on the HVI was the continued decline in Sydney\u2019s home values, slipping 1.2% in June after three consecutive months of negative growth.\u00a0<\/p>\n
Sydney home values are now down 3.2% over the quarter.\u00a0<\/p>\n
Melbourne recorded the second-largest drop, down 1.0% in June.\u00a0<\/p>\n
Similar to Sydney, Melbourne home price growth has been negative in the previous indexes, resulting in a 2.6% quarterly decline.\u00a0<\/p>\n
Rounding out the June losses is the ACT, where home values fell 0.6% month-on-month and 1.3% over the quarter.<\/p>\n
The falls in Australia\u2019s two largest markets pulled the headline index lower, although the national results reflected a broad cooling across the country.\u00a0<\/p>\n
Previously high-performing markets lose steam<\/p>\n
Mid-sized capitals Brisbane and Perth, which led gains earlier in the year, recorded modest monthly increases of 0.3% and 0.7%, respectively, in June.\u00a0<\/p>\n
\u201cThis represents a material slowdown relative to the pace of gains through the March quarter, when Brisbane values rose at an average monthly pace of 1.9% and Perth at 2.5%,\u201d Cotality\u2019s research director Tim Lawless said.\u00a0<\/p>\n
Meanwhile, Adelaide home values flatlined over the month.\u00a0<\/p>\n
As the market rapidly decelerates, the HVI has seen recent months revised lower.\u00a0<\/p>\n
\u201cMost regions have seen values revise lower over recent months, with the largest downgrades occurring in Perth and Brisbane, where the May index has been revised 88 and 53 basis points lower with the June update.\u201d<\/p>\n
The weakening in home values across capital cities pushed combined capitals\u2019 price growth down 1.3% over the quarter.\u00a0\u00a0<\/p>\n
Regional areas continue to record gains, albeit at a modest 0.3% monthly, no longer sufficient to offset the drag in the capitals.<\/p>\n
Pullback in demand drives home values down<\/p>\n
Weak demand rather than surge in supply is driving home values down, according to Cotality.\u00a0<\/p>\n
\u201cA weaker housing market can be seen across other metrics, including auction clearance rates, estimates of home sales and the number of properties listed for sale,\u201d Mr Lawless said.<\/p>\n
Sales volumes over the three months to June were 16.2% lower than a year ago, and 14.5% below the five-year average.\u00a0<\/p>\n
At the same time, total listings across the capitals are almost 11% higher than a year earlier.<\/p>\n
Combined capital cities auction clearance rates have held below 50% since the last week of May, dropping to the low-40% range from late June.<\/p>\n
\u201cSuch low clearance rates indicate a mismatch between buyer and seller pricing expectations. Buyers now have more stock to choose from and less urgency in their decision-making,\u201d Mr Lawless said.<\/p>\n
\u201cHigher listings aren\u2019t due to a pick-up in the flow of new listings; it\u2019s a symptom of less demand in the market, which has led to an accumulation of advertised stock.\u201d<\/p>\n
See also: Australia’s housing boom hits a wall as prices tip and profits peak<\/a><\/p>\n Which factors are weighing on home buyer demand?<\/p>\n Not just one but a range of macroeconomic and policy factors are feeding into the downturn.\u00a0<\/p>\n Interest rates remain elevated, with the Reserve Bank holding the cash rate at 4.35% in June after three increases in 2026, while leaving open the possibility of further tightening.\u00a0<\/p>\n \u201cWith underlying inflation<\/a> still above target and the labour market<\/a> remaining tight, the data flow over the next few months will be important in determining whether the current pause can be sustained, \u201c Mr Lawless said.\u00a0<\/p>\n At the same time, the Westpac-Melbourne Institute of Consumer Sentiment fell 2.9% in June, with households reporting growing pressure on finances and deteriorating expectations for house prices<\/a>.<\/p>\n Changes to negative gearing<\/a> and capital gains tax<\/a> announced in the federal budget are also expected to weigh on investor demand for established housing, according to Cotality.\u00a0<\/p>\n \u201cEven before interest rates rose by 75 basis points, we were seeing affordability hurdles weighing on buyer demand,\u201d Mr Lawless said.<\/p>\n \u201cHigher cost-of-living pressures, deeply pessimistic sentiment and a further dampening of demand via property taxation changes announced in the federal budget<\/a> are all contributing to weaker housing conditions.\u201d<\/p>\n But supply-side constraints persist<\/p>\n Reflecting Cotality\u2019s call that home values peaked in March, the latest HIA Housing Affordability Report reveals housing affordability fell by 4.5% in the March quarter, the \u201cworst in more than 30 years\u201d.\u00a0<\/p>\n The report shows it now takes more than 1.8 average incomes to service a typical mortgage nationwide, highlighting the growing strain on borrowers.<\/p>\n “Australia’s housing affordability problem is caused by too few homes,\u201d HIA chief economist Tim Reardon said.\u00a0<\/p>\n “The latest interest rate increases have reduced borrowing capacity<\/a>, but the underlying driver of poor affordability remains that housing supply has failed to keep pace with population and economic growth,” he added.<\/p>\n