House prices across the nation continue to move higher, getting dragged along by continued strength in both Sydney and Melbourne as house prices continue to rise.
According to the latest data from the CoreLogic, it was Melbourne property prices that gained the most in the month of October, up 2.3 per cent – its strongest result since 2009, while Sydney was almost as strong gaining 1.7 per cent.
Over the last three months alone, Melbourne is now the strongest performing capital city, up 5.5 per cent.
Nationwide dwelling values increased 1.2 per cent, with Brisbane and Hobart also showing good signs and rising by 0.8 per cent and 0.9 per cent respectively.
Once again it was the Perth housing market that was the weakest in the country, falling -0.4 per cent. Over the last three months, Perth was again the poorest performer in the country, down -1.7 per cent.
According to CoreLogic research director Tim Lawless, the stronger rebound in Melbourne and Sydney can be attributed to a blend of factors including tighter labour market conditions and stronger population growth relative to the other capitals. This was helped along by the stimulatory effect of the lowest mortgage rates since the 1950s, and improved access to credit. Stamp duty exemptions for first home buyers purchasing under specific price points have added additional stimulus to housing demand.
“It’s becoming increasingly clear that the housing market rebound is gathering pace, both geographically and across the broad valuation cohorts, off the back of lower mortgage rates and improved access to credit, as well as an improvement in affordability relative to the market peak several years ago and consistently high demand via population growth,” Mr Lawless said.
“Demand for housing is responding to stimulus measures, including mortgage rates that are now lower than anything we have seen since the 1950s and improved mortgage serviceability tests following APRA’s decision to adjust the minimum interest rate serviceability rules in July this year.”
Highlights over the three months to October 2019
- Best performing capital city: Melbourne +5.5 per cent
- Weakest performing capital city: Perth -1.7 per cent
- Highest rental yield: Darwin 5.8 per cent
- Lowest rental yields: Sydney 3.2 per cent
Lowest stock levels since the GFC
Along with the clear increase in housing values has been a steady rise in sales activity.
Although the annual number of settled sales remain around 17 per cent below the decade average, Mr Lawless believes there has been a clear upward trend in buyer activity since June.
The rise in buyer numbers is occurring while advertised stock levels remain very low. Nationally, the number of new listings being added to the market is 12% lower than a year ago; in fact freshly advertised stock levels haven’t been this low since the Global Financial Crisis.
“There has been a shortage of new listings for several years which has likely resulted in some pent up demand from homeowners looking to sell,” he said.
“Despite the improved selling environment, new stock additions remain low for this time of the year, which is likely a reflection of ongoing uncertainty and low confidence.
“Measures of consumer sentiment have been trending lower, with households reading through the low interest rate setting to the underlying weakness in Australia’s economy.
“Buying and selling a home requires a high degree of commitment which becomes much harder when there are doubts around household finances or job prospects.
“In addition, total advertised stock levels are 11 per cent lower relative to last year and tracking at the lowest level since 2010.
“Such a small pool of available stock against rising buyer demand is creating some competitive pressure amongst buyers which is adding to urgency in the market and supporting upwards pressure on values.”
Sub-regions are strong
The non-capital city sub-regions of Australia have generally shown a healthier performance relative to the capital cities. Seventeen of the 42 regional areas have recorded a rise in values over the past year, led by Tasmania’s Launceston (+4.7 per cent) and closely followed by Queensland’s Mackay-Isaac-Whitsunday region which is recovering rapidly after a significant correction.
Over a shorter time frame, over the three months ending October 2019, the best performing regional market has once again been Launceston (+3.1 per cent), followed by Illawarra (+3.0 per cent), Mackay-IsaacWhitsunday (+2.5 per cent), Gold Coast (+1.9 per cent) and Cairns (+1.8 per cent).
Rental markets are weakening
Rental markets have remained subdued, with rental rates falling across five of the eight capital cities over the three months ending October 2019.
The largest declines are confined to Darwin, where rents are 1 per cent lower over the past three months, and Sydney where rents are down 0.7 per cent.
The only capital cities where rents were up over the rolling quarter were Brisbane (+0.2 per cent) and Adelaide (+0.3 per cent).
Soft rental conditions can be attributed to a range of factors including the recent history of rising rental supply, demonstrated by unprecedented levels of investment participation in the housing market between 2012 and 2017, as well as a significant increase in dwelling construction skewed towards rental accommodation in the high rise apartment sector.