October 11, 2019

Australian Housing Market Update: October 2019

Housing market made further progress towards a recovery in September, recording the third consecutive month of gains.

The housing market made further progress towards a recovery in September, with CoreLogic’s national home value index recording the third consecutive month of gains, lifting the national value of housing by a cumulative 1.7% since the market found a floor in May 2019. The month-on-month lift of 0.9% in national housing values was the largest monthly gain since March 2017.

Although housing values are now consistently tracking higher, at least at a macro-level, the national index remains 6.8% below the October 2017 peak, indicating that buyers still have some time to take advantage of improved housing affordability before values return to record highs.

The September gains were once again driven by stronger conditions emanating from Sydney and Melbourne where dwelling values increased by 1.7% over the month; Australia’s two largest cities have seen a rapid bounce-back in home values over the past two months, with Sydney up a cumulative 3.3% and Melbourne up 3.2% in August and September alone.  Housing values remain almost 12% below their July 2017 peak in Sydney and about 8% below Melbourne’s November 2017 peak.

Brisbane and Canberra were the only other capital cities to record a rise in dwelling values over the month, while conditions held firm in Adelaide. Values were down slightly in Hobart and continued their long run of losses in Perth and Darwin.

Most of the regional markets recorded a rise in September, with regional South Australia and regional Western Australia the only ‘rest of state’ areas to record a drop in values.

While all regions are benefiting from low mortgage rates and improved access to credit, strong economic and demographic conditions in Sydney and Melbourne help to explain the over performance in these markets despite housing affordability challenges in these areas.

Another factor driving the strength in Sydney and Melbourne property markets could be higher levels of investor participation.  The latest housing finance data from the ABS shows investors comprised 32% of mortgage demand across New South Wales and 26% of Victorian mortgage demand which is higher relative to any of the states or territories.

Nationally, investors  comprise around a quarter of mortgage demand, well down from the recent record highs of 43% set in 2015 and below the long term average which shows investors typically comprise around one third of mortgage demand.  With capital gains picking up and the narrowest spread on record between yields and mortgage rates, we will likely see investor activity rising.

To find out more, read the October Housing Market Update Transcript or take a look at the national or capital city update by clicking on the relevant link below: