Australia’s residential property market continues its downturn but the rate of decline has pulled back sharply as the number of new listings tighten.  

The monthly home value index released by property data from CoreLogic declined 0.14 per cent over the month – the smallest monthly loss since the Reserve Bank first started hiking interest rates in May last year.

CoreLogic’s research director Tim Lawless said consistently low numbers of new homes listed for sale and rising auction clearance rates were insulating home prices.

“The past four weeks have seen the flow of new capital city listings tracking 17 per cent lower than a year ago and 11.9 per cent below the previous five-year average,” Mr Lawless said.

Across the capital cities, Sydney home values recorded the only uplift, rising 0.3 per cent.

But the easing rate of decline was evident across the board, with Darwin the only capital city to record a steeper monthly fall over the month. 

Regional home values fell 0.3 per cent and faster than the 0.1 per cent decline across combined capitals, although the lift in Sydney home values largely accounted for this difference. 

Overall, rest-of-state regions were still performing the same or better than their capital cities.  

Mr Lawless said it was hard to say if the market was bottoming out or if this was “the eye of the storm”.

“Considering the Reserve Bank of Australia’s move to a more hawkish stance at the February board meeting, along with an expectation for a weaker economic performance and a loosening in labour markets, there is a good chance this reprieve in the housing downturn could be short-lived,” Mr Lawless said.

A second measure of movements in the residential property market from PropTrack also showed the downturn stalling. 

The index has also reported an easing pace of decline in recent months and has returned a 0.18 uptick in home prices in February. 

PropTrack senior economist Eleanor Creagh agreed it was too early to call the end of the downturn. 

“The constrained level of properties available for sale is ‘putting a floor’ under home prices and has concentrated buyer demand,” she said.

“The longevity and depth of the current downturn will be influenced by the level of supply, as well as the trajectory of interest rates, in the months ahead.”

Westpac economists expect the housing market correction to continue into 2023 as further monetary policy tightening flows through.

However, economist Matthew Hassan said the expected uptick in migration and subdued levels of new construction would likely support prices in coming years 

The bank’s economists expect dwelling prices to decline another eight per cent nationally in 2023 before lifting two per cent in 2024.

By Poppy Johnston in Canberra