CoreLogic Hedonic Index

Thought I'd start a thread on this as its one of the industry's leading indicators.

As for a first discussion point, Sydney and Melbourne both on track to post >1% losses on the index this month, much more significant than the -0.06% in Sydney that raised a few eyebrows last month. The media will have a field day on June 1st.

Also interesting, Brisbane will be best performer and Adelaide will be posting 5 consecutive months of gains. Perth will almost halve its YoY loss from -6% to around -3.5%.

https://www.corelogic.com.au/research/back-series.html

 

And here we go

Sydney, Melbourne house prices fall in May, CoreLogic says

 

I am wondering how many first home buyers in Melbourne have pulled out of the market until July 1st? Speaking with people I know that are looking for their first home, they are all holding off until the changes come in. It will be interesting to see what happens in the next few months.

 

Probably for the best, market might be on a clear downtrend in the next few months that even the FHB might be reconsidering. Oh and in a few months time credit might tighten more and rates rise more that even with the grant they might not be able to buy until the market moves down more.

Interesting times indeed.

Great to start this thread, waiting for the reading from May, I expect Brisbane not to perform as well as people expect given effects on economy by cyclone Debbie + bank lending changes.

 

FHB in VIC only affects properties under 750k, and even then its a sliding scale from 600k to 750k. That's less than the average house price.

Also investors make up 50% of the market. the biggest risk right now is that investors don't see value and pull out. Don't quote me but I recall reading somewhere that FHB's were something like 8-12% of buyers, so there is zero chance of them having anywhere near the impact that the investor buyers are having.

 

May numbers out.

Monthly Indices | CoreLogic
houses vs units MoM\

Brisbane (inc Gold Coast) 0.86 vs 0.87
Brisbane 0.37 vs -0.10

Looks like things are starting to moderate in Brisbane, though Gold coast seems to be still going all right

Houses and units in Syd/Melb both down >-1% and >-2.5% MoM

Looks like APRA and rate rises have paused the boom. Probably sentiment changing. Herd will be running to cash out this weekend.

 

Wont Interest rate rises will effect all markets?

 

Yes, but some markets will be effected more than others. I assume that those in the Sydney and Melbourne markets are more highly geared than those in the other states. Good to see that Brisbane is at least in positive territory. Not surprising that Hobart went back so much - I believe that previous months were an aberration.

 

I will be interested to see what happens in next 6 months. More stock generally comes onto market in Spring

 

Huge falls for Darwin and Hobart!

Next month we could well see Brisbane+GC overtaking Perth median, which is quite monumental. I think I last saw that over 10 years ago.

Would imagine a surge of FHB in melb (obviously buying well under $888k) would actually push the median down and maybe make the overall figures look worse in a couple of months.

 

I think this could hold true for something like the Domain house price report which is based on recorded sales, but the CoreLogic index I would imagine normalizes house prices by some localized benchmark to remove fluctuations caused by changing buyer demographics.

In effect, the index should represent the change in price at any given value within the house price spread. So even if a house costs less than the average, the fact that it went up relative to itself a month prior should be represented in the overall index value (if that makes any sense...)

 

September 1st update, and CoreLogic have updated their methodology. This gives a much smoother line through the year, which seems good as the old index was quite volatile at times. Notably though, it has dropped the growth of Syd and Melb YTD.

Previously Syd and Melb were up around 7.6% and 9.9% YTD. Now its more like 5.4% and 7%, with Sydney in particular being pretty much flat since the start of May. There was a very pronounced upward trajectory this time last year, so its a clear sign of a slowdown.

Also interesting, Brisbane is now clearly more expensive than Perth, and Adelaide is not far behind.

 

How do they count new properties?

For example, a suburb has 10 old apartments, each $1M now and $1M a year ago (zero growth). A new apartment was built and sold with $1.2M.

Do they report 0% increase, or 1.8% increase [(10 x $1M + 1.2M)/11] / [$1M] ?

To add more contrast... what if a new property is $5M. 36% growth or 0%?

 

Its a proprietary methodology so no one can answer that. The methodology also changes from time to time (around once a year or so isn't a surprise), and one such change landed today. So however they did this in the past may not be how they do it moving forward.

Corelogic seem to be one of the more accurate forecasters and banks and government rely on their data, so I'm pretty happy to give some weight to it without knowing particulars. If nothing else, their results go a long way to guiding media sentiment.

 

Report from Bank of Melbourne including further house / unit breakdown and commentary on Corelogic August reported results.

 

The median value is used. So if you have 10 properties, the average of the 5th and 6th properties is used. So your outliers don't really have an effect on the median.

 

300000
400000
410000
415000
420000
440000
470000
500000
550000
570000

avg of 5th&6th = $430,000

now 2 new properties sold, for those 10 apt = 0% growth :
700000
720000

avg of 6th&7th = $455,000

5.8% growth, no effect??

 

In your previous example it wouldn't have had an effect...

In your new example, the difference would be 5.8% growth despite 2 new properties selling for over 60%+ the median (so yes not much effect). You're right though, the numbers can hide things You could go more granular and try to compare 'like' housing types to get a better picture.