As September came to a close, there was light at the end of the tunnel for the property market as spring showed signs of heating up.
While Sydney finished the month with a bang thanks to a super sized Saturday of auctions, much of Melbourne’s attention was drawn towards the AFL Grand Final despite identical upswing. Brisbane’s smaller bite of the auction cake resulted in an increase in volume from 2018.
Now one month into spring and the national housing market is in full bloom with CoreLogic’s home value index report recording the third consecutive month of gains since the cycle bottomed out in May this year.
Tim Lawless, CoreLogic’s head of research, said, however, that overall values are still lower than their high point two years ago.
“Although housing values are now consistently tracking higher, at least at a macro-level, the national index remains 6.8 per cent 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,” he said.
Yet again the monthly national increase in values was driven by the major markets of Sydney and Melbourne, where dwelling values increased by 1.7 per cent in each during September.
In the past two months alone, Australia’s two biggest capitals have bounced back a cumulative 3.3 per cent in Sydney and 3.2 per cent in Melbourne. Median home values now sit at $805,424 in Sydney and $634,913 in Melbourne.
In Brisbane values were stable, rising slightly by 0.1 per cent for the month of September. The median home value in the Queensland capital is now $492,474.
Of the three eastern seaboard capitals, Brisbane held the best looking gross rental yield for September at 4.4 per cent, compared with Melbourne (3.3 per cent) and Sydney (3.2 per cent).
Sydney and Melbourne’s markets have also been given a boost with an increase in investor activity. According to the latest housing finance data from the ABS, investors made up 32 per cent of home loan demand in NSW, while in Victoria they accounted for 26 per cent – both higher than any other capital.
The rapid bounce back in Sydney and Melbourne, compared with other capitals and regional cities, can be attributed to a number of factors.
“While all regions are benefiting from low mortgage rates and improved access to credit, economic and demographic conditions in NSW and Victoria continue to outperform most areas of the country,” Mr Lawless said.
“Population growth is higher, unemployment is lower and jobs growth is stronger, providing a solid platform for housing demand.”
The RBA board decided to lower the cash rate by 25 basis points to 0.75 per cent at its monthly meeting on October 1. It pointed to the need to further stimulate household spending, support employment and income growth as the prime reasons behind the move.
In explaining the decision the RBA pointed to “further signs of a turnaround in established housing markets, especially in Sydney and Melbourne
“In contrast, new dwelling activity has weakened and growth in housing credit remains low. Demand for credit by investors is subdued and credit conditions, especially for small and medium-sized businesses, remain tight. Mortgage rates are at record lows and there is strong competition for borrowers of high credit quality.”
Auction clearance – highs and lows
Overall, the number of auctions across the combined capital cities in the week to September 27 was 1262, up on the 895 auctions for the same week last year.
According to CoreLogic data, the final week of September saw Sydney finish with a 77.7 per cent preliminary clearance rate, a marked improvement on the 43.8 per cent position it sat at last year.
Despite lower than typical activity in Melbourne, in part due to the AFL Grand Final, the rate came in at 74.4 per cent, up from the 57.7 per cent final rate in the corresponding week in 2018.
For Brisbane, the preliminary clearance rate was 50.9 per cent as opposed to 36.6 per cent a year ago.