Home prices across five of Australia's eight capital cities have seen falls for the first time in 12 months, onset by the economic downturn caused by the coronavirus crisis.
Nationally prices fell for the first time since June 2019, by 0.4 per cent over May, while regional home prices remained flat.
Melbourne prices fell -0.9 per cent, -0.6 per cent in Perth, -0.4 per cent in Sydney and -0.1 per cent in Brisbane.
Over the month, prices grew by 0.8 per cent in Hobart, 0.5 per cent in Canberra and 0.4 per cent in Adelaide.
According to Corelogic, the bulk of the housing market turnover fell between March and April, with a particularly sharp fall in April of 28.2 per cent.
A partial rebound was seen across May, lifting by 21.4 per cent as restrictions were eased on open homes and on‑site auctions.
Despite the fall, house values in Sydney are still up by 4.2 per cent this year and by 1.6 per cent in Melbourne.
Over the past 12 months, Sydney values have marched up 15.6 per cent while in Melbourne they are still 12.2 per cent in front.
Corelogic house price index
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^ Source: Corelogic
Despite widespread declines, Corelogic head of research Tim Lawless said a drop of less than half a per cent in housing values nationally showed the market had remained resilient to a material correction.
“With restrictive policies being progressively lifted or relaxed, the downwards trajectory of housing values could be milder than first expected,” Lawless said.
Lawless said that while consumer sentiment remained relatively low levels, real estate transaction volumes were now likely to benefit from this partial improvement.
“With consumers feeling more confident, households are better equipped to make high commitment decisions such as buying or selling a home.
“A lift in housing market activity should also support broader economic activity, with housing turnover providing positive flow-on effects to other sectors including retail, construction and banking,” Lawless said.
The Westpac consumer sentiment index also rebounded 16.4 per cent from April to May, recovering around three quarters of the April drop.
Corelogic noted that while improved confidence was beginning to flow through to a rise in new listing numbers, total stock levels remain extremely low.
Importantly, transaction activity recovered by 18.5 per cent across the month of May following an April drop of 33 per cent.
House prices could now be bolstered by an impending announcement from the federal government which will assist buyers of newly constructed homes with a grant of at least $20,000.
Both existing home owners and first home buyers will be eligible for the program, which will focus on boosting demand for new homes. The program, expected to be uncapped, is likely to run from July.
There are also reports of a potential cash grant scheme for those wanting to renovate their dwellings.
However, a sharp drop in migration of up to 85 per cent due to coronavirus travel restrictions is expected to continue to weigh on demand for new homes.
Treasury estimates the number of long-term immigrants to Australia could drop by almost 300,000 over the next two years.
Both the NSW and Victorian state governments are also considering phasing out stamp duty and replacing with a land tax in an attempt to shield the building industry from the economic slowdown.
CBA senior economists said that despite the half-percentage point downturn nationally, the annual rate of growth remained at 13.4 per cent.
“Our base case is for national prices to fall by 10 per cent, but there are both upside and downside risks to that forecast.”
“At this stage the risks are titled towards a smaller fall given the economy is being opened up sooner than previously expected.”