Below trend growth to continue
Have dwelling values finally found a floor in July?
CoreLogic’s housing market update for August 2019 suggests that dwelling values may have found a floor in July, with our national index holding firm over the month following a consistent trend towards smaller month-on-month declines through the first half of the year.
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.
A number of factors are supporting the turnaround in housing conditions, however lower mortgage rates, improved access to credit and a boost in housing market confidence post the federal election are likely to be the primary drivers. Other factors include improvements in housing affordability, a reduction in advertised supply levels and recent tax cuts for low-income earners.
Mortgage rates are currently at levels not seen since the 1950’s, which is motivating buyers back into the market after annual housing sales fell by almost 30% from their 2016 peak. With housing values down a bit more than 8% nationally, and substantially larger falls across the most expensive markets, housing has become more affordable and access to credit has become a little easier with lenders using lower interest rates to calculate whether a borrower is able to service a mortgage.
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.
Importantly, 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. Recent CoreLogic valuations platform data shows a modest rise in the daily number of mortgage related valuation events, signaling a lift in housing finance commitments over the most recent two months.
No doubt policy makers will be keeping a close eye for signs of investor exuberance, or a more rapid acceleration in the recovery trend. If values were to start appreciating rapidly, there could be a renewed round of policy responses aimed at keeping a lid on housing prices whilst at the same time, allowing low interest rates to stimulate the economy more broadly.
With so much change taking place across the housing market, it seems there is even more attention than normal on the trends.
To find out more, read the August Housing Market Update Transcript or take a look at the national update or your capital city update by clicking on the relevant link below:
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