House prices fall again in February

According to CoreLogic, house prices fell again in February 2018.

National dwelling values fell by 0.1% in February, meaning that house values have fallen by 0.8% nationally since peaking in September last year.

The CoreLogic Home Value Index showed that the 0.1% decline was smaller than the 0.3% drop recorded in the previous two months. However, it also meant that national values had fallen for five consecutive months, which isn’t a great sign.

It wasn’t doom and gloom in every city. Dwelling values rose in Hobart by 0.7% in February and 3.2% over the quarter. Prices were flat in Adelaide over the month and rose by 0.1% over the past three months.

However, prices dropped again in Sydney. Over February, Sydney prices dropped by 0.6% and fell by 2.4% over the quarter. Sydney dwelling annual price changes have fallen into negative territory for the first time since 2012, which shows a 0.5% drop.

In Melbourne dwelling prices dropped by 0.1% in the month and 0.4% over the past quarter. In Brisbane prices also fell, values dropped by 0.1% during the month and 0.1% over the quarter.

Most capital cities have now fallen below their all-time high prices, with Hobart being the only one to remain at a historic high.

Gross rental yields remain very depressed. For houses the average gross yield in Sydney sits at 2.9% and the Melbourne house rental yield is 2.6%. It’s not much better for units with the Melbourne unit gross yield being 3.9% and the Sydney unit gross yield being 3.7%.

Many ASX businesses will be very carefully watching these value changes. Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ) are all heavily dependent on the housing market, they will be worried about the worsening equity values for investors.

Foolish takeaway

People from all corners have been calling for lower house prices. The slow price decline is probably good for everyone, so far there hasn’t been a ‘crash’ but there could be many months more of declines to come.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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