Surge in property prices hints at an end to downturn
AUSTRALIAN home prices rose more in October than in any month in the past four years, further suggesting the country’s property downturn could be over.
October’s 1.2 per cent rise in prices was the fourth straight monthly increase and the largest since May 2015, according to CoreLogic’s Home Value Index monthly survey.
“It’s becoming increasingly clear that the housing market rebound is gathering pace,” CoreLogic research director Tim Lawless said.
The strongest growth was in Melbourne and Sydney, where prices rose 2.3 and 1.7 per cent respectively, but prices were up across every capital city except Perth, where they dipped 0.4 per cent.
“Demand for housing is responding to stimulus measures, including mortgage rates that are now lower than anything we have seen since the 1950s,” Mr Lawless said.
Australia’s four largest banks now all offer fixed mortgage rates below three per cent after cuts to the official cash rate – the rate the Reserve Bank of Australia charges banks on overnight loans – in June, July and October.
Also, the Australian Prudential Regulation Authority changed the mortgage serviceability rules in July to make it easier to borrow, no longer requiring banks to determine if borrowers could afford a sudden spike in interest rates to 7.0 per cent.
“These developments have likely unleashed demand that was pent up over the period of falling prices between September 2017 and June this year,” AMP chief economist Shane Oliver said. The gains came after nationwide prices declined 8.4 per cent between October 2017 and June 2019.
They have since lifted 2.9 per cent from their June floor, but remain 5.7 per cent from their peak – putting them at a similar level to where they were three years ago.
Citing the booms and slumps, Dr Oliver said the Australian property market “is starting to look manic depressive,” particularly in Melbourne and Sydney. The 2.3 per cent gain in Melbourne prices was the largest month-on-month gain since November 2009.
Melbourne dwelling values are up 6.0 per cent since May, while Sydney values are up 5.3 per cent since then.
Mr Lawless attributed the stronger rebound in the two
IT’S BECOMING INCREASINGLY CLEAR THAT THE HOUSING MARKET REBOUND IS GATHERING PACE
TIM LAWLESS
cities to tighter labour market conditions and stronger population growth, as well as the stimulus effect of the lowest mortgage rates since the 1950s and improved access to credit.
Dr Oliver said AMP expected the property gains to slow, as there were still more units to hit the Sydney and Melbourne property markets and unemployment was likely to tick upwards as economic growth remains weak.
However, there is a chance the rapid rebound in Melbourne and Sydney house prices would fuel even stronger gains, “as price gains feed on themselves attracting more buyers back into the market who fear that they will miss out”. In Darwin and Perth, dwelling prices have declined 31 per cent and 22 per cent, respectively, since mid-2014.