The stringent government response to COVID-19 has undoubtedly placed the property market cycle on the cusp of another downswing, says CoreLogic's head of research Eliza Owen.
Property value declines have been fairly mild, so far this year, with national May home value index results showing the dwelling market declined just 0.4% over the month, and preliminary indicators for June are showing the rate of decline has gathered some momentum.
"The Australian housing market is not one market, but a collection of many. Over the past few months, dwelling market performance has varied by region, in both a cyclical and structural way," Owen said.
"As per historic cycles, the most expensive parts of Sydney and Melbourne seem to be leading the current downswing."
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Over the month of May, dwelling values in the top quartile of the Melbourne market (dwellings worth $959,500 or more) fell 1.3%, compared with a 0.6% decline across the middle of the market, and a 0.3% decline in the lowest value quartile.
Across Sydney, the same period saw a decline in the highest market segment (where dwellings are worth over $1.35 million) of 0.6%, followed by a 0.4% decline across the middle of the market, and a slight increase in the lowest value segment of 0.1%.
Owen said more expensive property can be most reactive and volatile in responses to changes in the cash rate.
"The performance of property markets amid COVID-19 suggest the high end of the market may also be more responsive to negative economic shocks," Owen said.
Melbourne's inner city and eastern suburbs have seen the largest decline across the metropolitan region, and the past two months have seen a decline in values across some high end markets in Sydney, such as North Sydney, the Inner West and the Northern Beaches.
Mandurah dwelling values were 38% below their 2006 peak at the end of May this year.
Owen said the renewed downwards pressure comes just after the Perth dwelling market was starting to enjoy a long-awaited growth phase in the start of 2020.
"International border closures in response to COVID-19 may have created a significant demand shock which had interrupted a recovery in the Perth -South East region," she said.
"Prior to this, dwelling values in the area had seen four consecutive months of growth between December 2019 and March 2020."
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