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Property prices continue to turn the corner

There are more positive signs for property prices across the country as the latest data from CoreLogic suggests the market is moving into a recovery phase.

This is the second straight month that prices have ticked higher in both Sydney and Melbourne as the positive sentiment in the market continues to improve.

Since APRA reduced the buffer rate on borrowers, prices across the country have seen a steady increase. Sydney, Melbourne and Brisbane all saw a rise of 0.2%, while the news was better in Hobart with a 0.3% jump, and Darwin leads all-comers with a 0.4% increase. Adelaide and Canberra both saw falls of -0.3%, while Perth continues to struggle with a -0.5% fall.

Head of research at CoreLogic, Tim Lawless was positive on what looks like a change of trend for property prices.

“Leading up to June we were seeing improving rates of negative declines so I think the fact we saw a rise in June in Sydney and Melbourne and now a broad-based rise in July is really just a continuation of the trend we’ve been seeing,” Mr Lawless said.

“The stabilisation in housing values is becoming more broadly based, with five of the eight capital cities recording a subtle rise in values over the month, while the regional areas of South Australia, Tasmania and Northern Territory also recorded a lift in housing values in July.”

Mr Lawless said there are a number of factors that are supporting the turnaround in housing prices, including lower mortgage rates, improved access to credit, a boost in housing market confidence post the federal election, and recent tax cuts.

The improved housing market conditions have lifted the annual rate of change to -6.4% nationally, with the annual rate of decline across the combined capitals index easing from a recent low of -8.4% to – 7.3%, while the combined regional markets are recording an annual rate of decline of -3.0%.

Interestingly, the improved results have come on the back of stronger markets in Sydney and Melbourne. Broadly speaking, it has been unit prices that have been holding up better than detached houses.

Mr Lawless said he believed the lack of affordable housing was a key driver of strong unit values.

“Despite an unprecedented amount of new apartment stock entering the market, Sydney and Melbourne’s unit values have consistently outperformed the detached housing sector through the downturn, and this trend is continuing into the recovery phase,” he said.

Sydney house values remain -0.2% lower over the past three months, while unit values have shown a slight rise (+0.02%). In Melbourne, house values were down -0.3% over the most recent three-month period, while unit values are 1.1% higher.

Results over the three months to July 2019 were:

Best performing capital city: Melbourne & Hobart +0.1%

Weakest performing capital city: Perth -2.2%

Highest rental yield: Darwin 5.9%

Lowest rental yields: Sydney 3.4%

Capital city sub-regions

Although housing values have stabilised over the month across most markets, on an annual basis only three of the 46 capital city SA4 sub-regions have recorded a rise in values. While Hobart and Canberra top the list of best performers, areas of Brisbane and Adelaide comprise the remaining top 10 best-performing sub-regions over the past 12 months, although seven of the top 10 have recorded a decline over this period.

The weakest sub-regions, based on the annual change in dwelling values, are confined to areas of Sydney, Melbourne and Perth. As Sydney and Melbourne’s values level out and Perth’s values continue to trend lower, sub-regions of Perth are once again starting to comprise a larger portion of the top 10 list for the largest annual fall in dwelling values.

Regional sub-regions

Growth conditions across regional markets remain diverse, with the highest annual capital gains recorded across the South East and the West / North West sub-regions of Tasmania. NSW’s Riverina region is also continuing to show solid capital gains.

The weakest regional markets tend to be the broader outback and agricultural regions of Queensland, Western Australia and South Australia, where drought conditions are weighing down housing activity and dwelling values.

The regions surrounding the Sydney metro area have also recorded larger value falls over the past 12 months. With Sydney values now stabilising, we might see a similar but lagged trend in these satellite markets as well.

Positive Indicators for Property Pricess

While the increase in property prices as a whole is positive, there are also other housing and credit indicators showing a positive trend.

Auction clearance rates have been holding above 70% through most of July across Sydney and Melbourne, indicating a better fit between buyer and seller pricing expectations.

At the same time, advertised housing stock has been reducing. Across the combined capitals, the number of freshly-advertised properties is down 25% relative to the same time last year, and total advertised stock levels are now tracking 5% lower relative to a year ago. The reduction in available stock creates less competition among sellers and increased competition among buyers, adding support to higher prices.

According to Mr Lawless, the trends in housing credit have also been pointing towards stability.

“Although housing finance data from the Australian Bureau of Statistics is only current to May, the trend leading up to June was clearly pointing towards an easing in the credit downturn,” he said.

“Recent CoreLogic valuations platform data shows a modest rise in the daily number of mortgage-related valuation events, signalling a lift in housing finance commitments over the most recent two months.”

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