The brisk growth of the property market has stunned most everyone and proved economists wrong. Economists have cautioned that Australia’s slow economy will continue and told us to expect house prices to fall until the year is out. They said house prices will only start to go up next year—and only modestly.
Recent data says they’re wrong. According to CoreLogic’s August data, house prices were up by 1 per cent for combined capitals in August. This is the first increase in values per month since October 2017 and the largest since April 2017. At this rate, we can expect a 12 per cent annual growth. That is huge!
And nobody saw it coming.
In Sydney, things are even peachier.
Sydney recorded an increase of 1.6 per cent– that is 19 per cent per annum. It’s the best performing capital city with a 1.9 per cent growth over three months.
What CoreLogic said will be an “L-shaped” growth— where prices fall and flat out for some time— now has become a “V-shaped” recovery, and CoreLogic has confirmed their short-term outlook to be so.
Head of research Tim Lawless said, “At CoreLogic our expectation has been that this recovery would be a slow and steady one, however, with housing credit restrictions easing and mortgage rates likely to reduce further, this rebound could potentially turn into a ‘v-shaped’ recovery.”
“It’s likely that buyer demand & confidence is responding to the positive effect of a stable federal government, as well lower interest rates, tax cuts and a subtle easing in credit policy,” he said.
He noted that it was the third successive month of capital gain in Sydney, Melbourne, and Hobart and the second successive month in Brisbane. He said, “While the ‘recovery trend’ is still early, it does appear that growth trends are gathering some pace, particularly in the largest capital cities.”
This month’s data on house prices underscores the clear turnaround in the property market. Mr Lawless said that since May, they have “consistently heard that housing market confidence has improved and the data since then continues to confirm the improved sentiment.”
According to CoreLogic, monthly sales activity also has gone up over the recent months. And even though house sales data may not still be reflecting it with the figure still below the decade average, a marked upward trend can already be seen.
CoreLogic also acknowledged auction clearance rates increasing at a remarkable rate. Auction clearance rates for Sydney and Melbourne are at the highest levels since early 2017. Recent data on housing credit also shows an upward shift in credit growth.
All these indicate a recovering property market but Mr. Lawless recommends siding on caution and waiting for spring to fully assess housing market conditions.
He said, “A key contributor to the housing recovery has been the increase in buyers, but also a lack of advertised stock.”
“As stock levels continue to rise throughout spring, we will get a much better understanding of the depth of the current recovery. As listing numbers and auction volumes rise, clearance rates may soften if buyer demand doesn’t lift to match the increase in supply.”
New advertised stock levels are now increasing, though it’s coming from a very low base. Total new inventory levels are at -17 per cent lower than last year with Sydney and Melbourne getting the largest year-on-year decline.
But with favourable conditions, even with stock levels rising, it’s plausible to expect demand meeting supply and the continued recovery in house prices. This could be the start of the housing bull market.
And no, it’s not just optimism talking.
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