Housing rebound on track

Sydney, Melbourne lead way as borrowing easier

THE housing recovery continued apace in September, with record low interest rates and looser borrowing rules fuelling the fastest growth in property prices since March 2017.

The national dwelling price increase of 0.9 per cent for the month was largely driven by a strong rebound in the key Sydney and Melbourne markets, where values were up 1.7 per cent over the month, according to the Corelogic September home value index.

Australia’s two largest cities have recorded a rapid rebound in home values in the past two months, with Sydney up a cumulative 3.3 per cent and Melbourne up 3.2 per cent in August and September.

The data came before the RBA cut the cash rate to a new record low 0.75 per cent at its board meeting yesterday.

A lower cash rate supposedly reduces borrowing costs for mortgage holders, though none of the big four banks passed on the full 0.5 per cent aggregate cut to lenders in June and July, and were predicted to hold even more back from yesterday’s cut.

The adoption of looser borrowing rules by APRA in July has also helped push house prices higher, a development that has left some concerned over the potential re-emergence of risks to borrowers.

The Government, however, has cheered the recent boost in house prices with Treasurer Josh Frydenberg (pictured) noting a 10 per cent rise in house prices could boost GDP growth by 0.5 per cent.

NAB director of economics and markets Tapas Strickland said a steep downturn in dwelling construction could head off any meaningful GDP contribution though, with building approvals trending lower by 24 per cent year on year and financing conditions for developers remaining tight.

Property values remain 11.9 per cent below their July 2017 peak in Sydney, and 7.9 per cent below Melbourne’s November 2017 peak. CoreLogic head of research Tim Lawless said higher levels of investor participation were driving the renewed strength in Sydney and Melbourne property markets, though underlying economic strength in the cities had also helped.

“While all regions are benefiting from low mortgage rates and improved access to credit, economic and demographic conditions in New South Wales and Victoria continue to outperform most areas of the country,” Mr Lawless said.

“Population growth is higher, unemployment is lower and jobs growth is stronger, providing a solid platform for housing demand.”