Buyers are coming out in numbers in Australia’s two major cities and it was the driving force behind the first big jump in house prices that we’ve seen in many months.
According to the latest data from CoreLogic, Sydney house prices rose by 1.6 per cent, while Melbourne jumped by 1.4 per cent.
Across the country, dwelling values increased by 0.8 per cent, the first time the monthly number has jumped since October 2017.
The surge in prices is being led by a flurry of buyers hitting auctions in the largest cities, with an undersupply of quality stock.
Since this time last year, the RBA has reduced the official cash rate to 1 per cent, negative gearing has been retained thanks to the Liberal victory at the Federal Election and APRA has eased back on its lending restrictions, culminating in market bounce.
Head of research at CoreLogic, Tim Lawless believes it is a buyer driven response.
“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 stock advertised for sale remains low,“ Mr Lawless said.
“It’s likely that buyer demand and confidence is responding to the positive effect 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 capitals over the month, but slipped lower in Adelaide, Perth and Darwin. Across the rest-of-state regions, only Victoria, Tasmania and the NT recorded monthly increases.
Mr Lawless noted it was the third successive month of capital gain in Sydney, Melbourne and Hobart and the second successive month of increases in Brisbane.
“While the ‘recovery trend’ is still early, it does appear that growth trends are gathering some pace, particularly in the largest capital cities,” he said.
Highlights over the three months to August 2019
- Best performing capital city: Sydney +1.9%
- Weakest performing capital city: Perth -1.8%
- Highest rental yield: Darwin 6.0%
- Lowest rental yields: Sydney 3.3%
The rolling quarter saw national values lift by 0.6 per cent; the first rise in values over a three month period since November 2017.
Combined capital city dwelling values have increased by 1 per cent over the past three months while combined regional market values have continued to trend lower, down -0.6 per cent.
Capital city sub-regions
Over the three months to August 2019, 26 of the 46 capital city sub-regions have recorded an increase in dwelling values. In Sydney, the Central Coast was the only region not to see an increase in values over the past three months.
In Melbourne, every sub-region of the city has seen a lift in values over the three months ending August 2019. Breaking down the quarterly results geographically, it is those areas close to the city centres in Sydney and Melbourne that have recorded the largest value increases.
On an annual basis, it was a different story, with only four of the regions avoiding falls over the past year. The 10 regions experiencing the largest declines are located in Sydney, Melbourne, Perth and Darwin.
Non capital city sub-regions
The last three months has seen ongoing declines in regional dwelling values, however, values have increased in 11 of the 43 sub-regions and remain unchanged across two sub-regions.
Areas where values have increased over the quarter across regional Australia includes Capital Region, Newcastle and Lake Macquarie and Richmond-Tweed in NSW, Wide Bay, Mackay-Isaac-Whitsunday and Townsville in Qld and Geelong in Vic.
“Evidence of growth returning to areas such as Newcastle, Lake Macquarie and Geelong may well be a hint that the value growth occurring in Sydney and Melbourne is already beginning to spillover into nearby regions. Looking at these results annually rather than quarterly shows much stronger growth trends,” Mr Lawless said.
The latest month’s housing data confirms the ongoing turnaround in housing market conditions.
“We have consistently heard that housing market confidence has improved and the data since then continues to confirm the improved sentiment.
“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.”
In a shock move, the recent surge in prices could mean APRA comes back with more tightening measures.
“If the strong rises in values continue over coming months, we would not be surprised to see a new round of macroprudential policies introduced in order to keep debt levels in check and encourage spending in other areas of the economy,” Mt Lawless said.
