As house prices in Australia increase, the time to buy a cheap property might be running out. Recent data shows the upsurge in demands for new houses is not being met by the volume of available houses in the market.
CoreLogic’s monthly house prices index shows that house values across Australia rose 1.2 per cent in October, a figure 2.9 per cent higher than house values’ lowest point in June. In contrast, while house buyers are increasing, the houses available in the market is still 11 per cent lower than it was the same time last year.
CoreLogic research director Tim Lawless said that these latest numbers indicate that the housing market rebound is gaining momentum geographically as well as across the broad value-based cohorts on the basis of lower mortgage rates, better access to credit, house affordability, and high demand caused by population growth.
He said, “Demand for housing is responding to stimulus measures, including mortgage rates that are now lower than anything we have seen since the 1950’s and improved mortgage serviceability tests following APRA’s decision to adjust the minimum interest rate serviceability rules in July this year.”
As you may recall, the Reserve Bank of Australia (RBA) has cut interest rates three times in five months since June. This has undoubtedly given way to greater purchase power which with the shortage of fresh listings for the last years may have led to “pent up demand,” as Mr. Lawless noted.
“Despite the improved selling environment, new stock additions remain low for this time of the year, which is likely a reflection of ongoing uncertainty and low confidence.”
He also said that advertised stock levels are down 11 per cent from last year, and are near lowest levels since 2010.
With a small pool of available stocks coupled with rising buyers demands, competitive pressure amongst buyers is to be expected. All these affect market conditions, adding urgency and supporting house prices surge.
Market Conditions and House Prices in Australia
Melbourne and Sydney consistently show an increase in house values. Sydney’s dwelling values increased 1.7 per cent, creating a quarterly growth of 5.0 per cent while Melbourne making a phenomenal 2.3 per cent increase in October alone.
Lawless said the strong performance of Sydney and Melbourne is due to tighter labour market conditions and strong population growth, not to mention low-interest rates.
Of all, Perth is the only capital city to show a decrease of 0.4 per cent in values, though Mr. Lawless believes that it is starting to show improvements with only a small decrease in quarterly values in 14 months.
Perth property market is also expected to make a rebound with the stamp duty rebates making a huge reduction in house prices.
Values also increased 0.9 per cent in Hobart, 0.8 per cent in Brisbane, 0.6 per cent in Canberra, 0.3 per cent in Darwin, and 0.4 per cent in Adelaide.
Mr. Lawless said that “Focusing on housing market conditions across the broad value-based cohorts highlights that the market recovery is being led by the most expensive quarter of the market, although values are also rising across the more affordable strata as well, just not as rapidly.”
The increase in values across capital cities over the recent three-month period shows the “depth of the current housing market recovery,” Mr. Lawless observed.
With the continuing demand for houses and the weak supply of fresh new listings, house prices in Australia may further escalate.
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