Welcome to CoreLogic’s housing market update for September 2019.
The recovery in housing values accelerated in August with national dwelling values increasing by eight-tenths of a per cent over the month. This was the first month on month rise in the national index since values peaked back in October 2017. And it was the largest monthly lift since April 2017.
The August reading was certainly a step-up in the pace of recovery. However, market conditions have been consistently improving throughout 2019 as the rate of decline lost momentum. And then, national dwelling values stabilised in July before rising in August.
The significant lift in values over the month aligns with a consistent increase in auction clearance rates, and a deeper pool of buyers, at a time when the volume of housing stock that’s being advertised for sale remains quite low. It’s likely the buyer demand and confidence is responding to the positive effects of a stable federal government, as well as lower interest rates, tax cuts, and a subtle easing in credit policy.
Housing values increased across five of the eight capital cities over the month, but they slipped lower in Adelaide, Perth in Darwin. Across the rest of the state regions, only Victoria, Tasmania, and the Northern Territory recorded monthly increases.
August marked the third successive month of capital gains in Sydney, Melbourne, and Hobart and a second successive month of increases in Brisbane.
So, while the recovery trend is still early, it does appear that growth trends are gathering some pace, particularly in the largest capital cities. Across the regional areas of Australia, 11 over the 42 sub-regions have recorded a rise in dwelling values over the past three months, and two regions have returned a stable result.
Regional areas where values increased over the rollng quarter include the Capital Region, Newcastle, and Lake Macquarie and the rich between region in New South Wales, as well as Wide Bay, The Mackay, Isaac and Whitsunday Regions and Townsville in Queensland, as well as Geelong and Victoria.
Evidence of growth returning to areas such as Newcastle and Lake Macquarie as well as Geelong may well be a hint that the value growth occurring in Sydney and Melbourne is already starting to spill over into the nearby regions.
Looking at the market performance by broad valuation cohorts and it’s clear that the more expensive end of the market in Sydney and Melbourne is the primary driver of the rebound in capital gains.
The rapid recovery across higher-value properties makes sense considering, this sector of the market recorded a much more substantial correction.
Additionally, borrowing capacities have recently increased thanks to a relaxation of serviceability assessments from APRA.
For prospective buyers looking to upgrade into larger or more expensive properties, it seems like an opportune time to be doing so. While dwelling values are now rising the same can’t be said for the national rental market with rents recording a further fall of 0.1% over August. That’s the third consecutive month of negative rental movements. The only exceptions were in Brisbane, Adelaide, and Hobart where rental rates increased over the month.
While rents softened over the past month rental rates increased in all capital cities other than in Sydney and in Darwin over the past year.
With value growth now at pacing rental growth, the improving trend in capital city gross rental yields is now reversing.
Most regions are recording rental yields higher relative to a year ago. However, the more recent strain of the data shows that yields are now stabilising or the trending lower.
Brisbane values have posted their second consecutive month of subtle gains. Dwelling values tick to 0.2% higher in both July and August following a relatively shallow decline phase where home values fell by 2.9%. Unit values have led the improving conditions rising by one and a half per cent over the three months ending August, while house fellows remain relatively flat actually down 0.2% over the same time. The local unit market seems to emerge from the supply hangover, which contributed to 13.3% overall decline in unit values, between the unit market peak back in early 2010 and June 2019.
The latest monthly housing data confirms the ongoing turnaround in housing market conditions. Since late May, we’ve consistently heard that housing market confidence has improved, and the data since then continues to confirm the improved sentiment. Monthly sales activity began to increase over recent months are those sales are still well below the decade average. An upwards trend is becoming very much evident. Auction clearance rates continue to climb, and they’re now at their highest level since early 2017 in both Sydney and Melbourne.
The latest housing credit data to July also shows a slight rise in credit growth, which has been driven by a sizeable increase in credit to owner-occupiers. While all these factors point to an improvement in housing market conditions, new advertised stock levels are now increasing, albeit from a very low base.
Totalled new inventory levels remain 17% lower than a year ago with the largest year-on-year declines recorded in Sydney and in Melbourne. With the spring selling season now here, the seasonal rise in advertising listing numbers will be a timely test of the markets depth.
As listing numbers and auction volumes rise, the pace of growth may soften if by demand doesn’t lift to match the increase in supply. Our expectation has been that this recovery would be a slow and steady one, considering tighter credit policies and slower economic conditions.
However, with housing credit restrictions recently easing and mortgage rates likely to reduce further, this rebound could potentially be more rapid than we were previously expecting. No doubt policymakers and regulators will be monitoring the housing market indicators very closely over the coming months.
At the outset it appears that a rapid recovery would confirm that low-interest rates and a loosening in credit policy is reigniting some market exuberance, that’s despite housing affordability remaining a significant challenge, rising unemployment, low wages growth, and near record-high levels of household debt. If the strong rises and values do continue over the coming months, I wouldn’t be surprised to see a new round of macro-prudential policies introduced, in order to keep debt levels in check and encourage spending in other areas of the economy.
If you’d like to keep an eye on the latest housing market trends, make sure you check out our research pages at www.corelogic.com.au
Source – CoreLogic