Cotality’s national Home Value Index held steady in May, signalling a further loss of momentum across most housing markets. Beneath the flat national result, Sydney and Melbourne are leading the downturn, with dwelling values declining 0.9% and 0.8% respectively over the month, and now sitting 2.1% and 2.9% below their cyclical peaks in November last year. The ACT also recorded a modest fall, with values down 0.2% in May.

In contrast, values across the remaining capitals continued to edge higher, although the pace of growth is clearly slowing. Perth and Darwin posted the strongest monthly gains at 1.5%, followed by Brisbane and Hobart at 0.9%, while Adelaide recorded a 0.5% increase.

Cotality research director Tim Lawless noted that this level of divergence has been a defining characteristic of housing market 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," Mr Lawless said.

This slowdown has been developing for some time, well before interest rates began to rise, geopolitical tensions escalated in Iran, and tax changes were outlined in the Federal Budget. Most cities reached a peak in value growth during spring last year as affordability and borrowing capacity constraints increasingly dampened housing demand.

Lower-priced segments continue to display relatively stronger and more resilient conditions than the upper tiers across most capital cities. However, the rate of growth is also moderating in these more affordable parts of the market.

“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 reflected in fewer transactions. Nationally, estimated home sales over the past three months were 2.2% lower than a year earlier 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. These are also the cities where advertised supply has risen to above average levels, providing more choice and better leverage for buyers.” said Mr Lawless. 

Selling conditions have also softened as demand and supply move back towards balance. The weighted average clearance rate across the capitals hovered around 50% through the second half of the month, while listing volumes are trending higher in most markets.

Regional markets have been comparatively more resilient, with housing values across the combined regionals rising 0.6% in May, although momentum is slowing here as well. The monthly increase was the smallest in a year and, as with the capitals, the pace of growth continues to ease.

All broad rest-of-state markets are still recording positive growth in home values. Regional WA led the gains with a 1.9% rise over the month, while regional NSW recorded the smallest increase at 0.2%.