Signs of an End to the Housing Downturn
Australian property prices may have reached the bottom, at least for the moment. Despite falling prices in some markets, the worst housing downturn in modern history may be coming to an end earlier than expected. CoreLogic's monthly index has looked fairly positive over the last couple of months, with modest price rises in July adding to early increases in June across Sydney and Melbourne. With larger markets often making the first moves, these small gains may be an early sign of a larger trend to come.
According to the latest data from CoreLogic, combined capital city housing prices in Australia were up 0.1% in July. While this ever-so-slight increase is certainly nothing to write home about, it is significant when viewed in relation to recent trends and individual city markets. While the overall national index remained flat; Sydney, Melbourne, and Brisbane were all up 0.2%. Darwin saw the most gains in July with 0.4% growth, followed by Hobart with 0.3%. While Perth, Canberra and Adelaide were still down at -0.5%, -0.3% and -0.3% respectively, the three largest national markets seem to be marching in line for the moment.
According to CoreLogic's head of research Tim Lawless, housing prices "may have found a floor in July... We're not really seeing signs of a recovery just yet, but absolutely we are seeing housing prices stabilising... We did see values rise last month in Sydney and Melbourne, in July we've actually seen that become a little more widespread - Sydney values are up 0.2 per cent, as are Melbourne values and Brisbane values, and also in Hobart and Darwin we've seen a subtle rise in values."
The index started moving north in June, at least in the nation's two biggest markets. While one month of positive results could be a blip, two months is looking a little more like the cautious start of a new trend. With Sydney and Melbourne having experienced the steepest decline in decades, this will be welcome news to many. CoreLogic results are not the only reason people are feeling a little optimistic, with Westpac's consumer sentiment survey also showing a significant rebound in the "time to buy a property" and "house price expectations" indices. When consumers themselves are expecting a floor, it's difficult for the market to disagree.
There are many reasons why people are feeling more optimistic, with the recent federal election and low interest rate environment giving people a little more confidence. Labor's proposed changes to negative gearing and the capital gains tax discount have been scrapped, along with the uncertainty that always accompanies a change in government. While few people seem inspired by the Morrison win, the market is always happy to avoid surprises. Lower mortgage rates are also providing some stimulus on the ground, with APRA's revised serviceability assessments also preventing some roadblocks when it comes to getting a mortgage.
While the official interest rate is now sitting at just 1%, homebuyers can expect anywhere from 3% and up when it comes to getting a new mortgage. In fact, the lowest variable rates are currently sitting just below 3%, with most major banks offering anywhere between 3.1% and 3.4%, and many offering competitive fixed rates of 3.5% or less. While there's probably no hurry to get into the market, new stable conditions could provide some much-needed support.