Over the second quarter of 2018, national dwelling values have declined by-0.5%, matching the -0.5% fall in values over the March quarter.
Throughout the 12months to June2018, national dwelling values have declined by-0.8%.
Althougha -0.8% fall isn’t overly large, it is the greatest annual fall in values since September 2012 when values had fallen-1.1% over the year.
While the headline figure is recording falls largely due to declines in Sydney and Melbourne dwelling values, housing market conditions have also softened in most other capital cities.
In fact, Brisbane, Adelaide and Hobart are the only capital cities where dwelling values remain at peak levels.
In Perth and Darwin, values have been below their peak since 2014, while markets such as Sydney, Melbourne and Canberra have also entered a downturn.
Even in Brisbane and Adelaide, where the pace of capital gains has been relatively sustainable, the rate of value growth has slowed over the past 12 months.
Value growth is slowing across NSW
Over the second quarter of 2018, Sydney dwelling values have fallen by -0.9% and values across regional NSW have increased by 0.8%.
Over the past 12 months Sydney values have fallen by -4.5% while regional NSW values have increased by 3.2%.
By comparison, 12 months ago Sydney values had increased by 16.4% and regional NSW values had increased by 11.9%.
While the Sydney market has been seeing values decline since July last year, values are still broadly rising outside of Sydney however, over recent months many of the regions adjoining Sydney have also started to experience value declines.
While dwelling values fall for the more expensive housing stock, lower valued stock continues to rise
Over the past year, dwelling values for the most affordable 25% of NSW housing stock has increased by 4.7% while the middle 50% of housing stock has fallen -0.9% and the most expensive 25% has recorded a decline of -6.1%.
In Sydney, the most affordable 25% of properties have fallen in value by -1.0% over the past year compared to a -3.0% fall across the middle 50% of the market and a much larger -7.3% fall across the 25% of most expensive properties.
Regional NSW dwelling values have increased 4.7% across the most affordable 25% of properties over the past year, are 4.5% higher across the middle 50% of properties and have increased by a lower 2.2% across the most expensive 25% of properties.
Settled transaction volumes in NSW are trending lower
Over the past three months there was 35,038 house and unit transactions settled in Sydney which was -9.9% lower than over the same three month period last year.
In Sydney, there were 20,601 settlements over the three months to June 2018 which was -12.1% lower than the same period in 2017.
There were 14,437 house and unit sales settled in regional NSW over the three months to June 2018 which was -6.6% lower than the number over the second quarter of 2017.
Rental growth is slowing in Sydney and remains fairly steady in regional NSW
Over the second quarter of 2018, Sydney rents fell by -0.3% while they increased by 0.2% over the period in regional NSW.
Throughout the past year, Sydney rental growth has slowed from 3.9% to 0.1% and in regional NSW annual rental growth was 3.4% a year ago and has slowed marginally to 2.8% over the past year.
Rental rates in Sydney are now -0.4% lower than they were at their peak while in regional NSW rents are -0.1% lower than their peak.
With values falling faster than rents, yields are increasing from historic lows
Gross rental yields in Sydney were recorded at 3.21% in June 2018, up from 3.05% in June 2017.
Regional NSW gross rental yields have fallen from 4.61% in June 2017 to 4.50% in June 2018.
Growth in NSW state final demand has slowed but remains quite strong
State final demand measures the total value of goods and services that are sold in a state to buyers who wish to either consume them or retain them in the form of capital assets.
It excludes sales made to buyers who use them as inputs to a production activity, export sales and sales that lead to accumulation of inventories.
Given it excludes exports and inventories it isn’t directly comparable to GDP.
State final demand in NSW increased by 0.7% over the March 2018 quarter and although that was the slowest quarterly growth in a year, it was much higher than the 0.1% increase in March 2017.
Over the past 12 months, NSW state final demand has increased by 3.7% which is the fastest annual growth since December 2016.
NSW’s labour force is much stronger than most other states and territories
The NSW trend unemployment rate was recorded at 4.8% in June 2018 which is the same as it was a year ago.
Over the past 12 months, NSW has created 143,912 jobs.
Based on the 143,912 jobs created over the past year, total employment has increased by 3.7% and 45.0% of all jobs created nationally last year were in NSW.
Population growth in NSW remains strong however, it has started to slow
Over the 12 months to December 2017, the population of NSW increased by 116,823 persons, the lowest it has been since March 2016.
Looking at the components, the 116,823 person population increase was comprised of 43,144 from natural increase, 92,978 persons from net overseas migration and there was a loss of 19,299 persons from net interstate migration.
Annual natural increase was the highest it has been since September 2016, net overseas migration was the lowest it has been September 2016 and the net outflow of residents was the largest it has been since March 2009.
Approvals for units are trending lower while house approvals rise
In May 2018, there were 5,727 dwellings approved for construction in NSW which was 7.3% higher over the month and 6.6% higher year-on-year.
Over the month there were 2,862 houses approved for construction, an increase of 20.1% over the month and a 1.0% increase year-on-year.
Recent data points to an easing in unit approvals with 2,865 approvals in May 2018 the fewest since December 2017 however, year-on-year approvals are 13.0% higher.
A very high number of dwellings were under construction across NSW at the end of March 2018
According to the ABS there were 87,266 dwellings under construction across NSW at the end of March 2018, which was only slightly lower than the historic high of 89,162 dwellings over the previous quarter.
The 87,266 is split between: 20,041 new houses, 66,054 new units and 1,171 non-new dwellings.
The number of new houses under construction increased to its highest volume since September 1989 over the quarter while the number of new units under construction fell however, it was the third highest figure on record.
Housing finance commitments in NSW rebound in May 2018
The total value of housing finance commitments in NSW during May 2018 was $14.4 billion which was 19.4% higher over the month but -8.1% lower from its recent peak.
The $14.4 billion was split between: $2.7 billion in owner occupier refinances, $5.9 billion in owner occupier new lending and $5.8 billion in lending to investors.
Although the value of lending rebounded over the month, all segments of lending across NSW are trending lower and as a share of total lending investors have shrunk to their smallest share since April 2016.