Sydney, Melbourne lead the way in property recovery but other cities aren’t necessarily following
Home values are up, and interest rates are down.
One month into the spring selling season and the Australian property market appears to be sprouting signs of a full blown recovery — at least for its two largest cities.
The RBA has today dropped the official cash rate from the previous low of 1 per cent to an unprecedented 0.75 per cent, the same day that property data firm CoreLogic released its September Home Values Index.
The report showed the third consecutive month of gains, lifting the national value of housing by a cumulative 1.7 per cent since the market found a floor in May 2019.
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The month-on-month lift of 0.9 per cent in national housing values was the largest monthly gain since March 2017. Much of the improvement is thanks to the rebound of our two biggest markets.
All eyes on Sydney and Melbourne
“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,” CoreLogic’s head of research, Tim Lawless said.
“Population growth is higher, unemployment is lower and jobs growth is stronger, providing a solid platform for housing demand.”
The index also reported that 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 per cent and Melbourne up 3.2 per cent in August and September. There is still a long recovery road ahead, however, as housing values remain 11.9 per cent below their July 2017 peak in Sydney and 7.9 per cent below Melbourne’s November 2017 peak.
Buyers back in business
Nerida Conisbee, chief economist of realestate.com.au said there is a definite shift in market sentiment this spring.
“There is no doubt that buyers are back, particularly in Sydney and Melbourne,” she said.
“Search activity has increased significantly in both cities and this is flowing through to pricing, particularly for premium suburbs. It’s likely we’ll see a ripple effect to other parts of the market over the rest of the year.”
Historically low interest rates have already played their part in giving the overall market a kickstart Ms Conisbee added.
“The market is definitely recovering. There has been a lot of stimulus — interest rate cuts, tax cuts and an easing of access to finance,” she explained.
Beyond the big two
But not all capital cities are behaving like their larger counterparts.
“Most other parts of Australia have been operating very differently to Sydney and Melbourne over the past two years,” Ms Conisbee said.
“Most of Tasmania and regional Victoria has seen very solid conditions while Adelaide has continued to do what Adelaide tends to do — remain steady while other markets oscillate.”
According to the Home Values Index, Adelaide is down 1.6 per cent from its peak.
“Perth and Darwin continued to tumble, Brisbane remained pretty steady, despite overblown fears of too many apartments,” she said, based on the CoreLogic data showing Perth is down 21.3 per cent since its highest point, Darwin is down 30.8 per cent but Brisbane is down 7.9 per cent.
“When we talk about the housing downturn, driven by finance restrictions, we have really been talking about Sydney and Melbourne. There is no doubt that interest rate cuts are positive for the market, but it is doubtful that a market like Hobart will see a surge in pricing given how strong conditions have been there over the past couple of years.”
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Looking to the CoreLogic report, Hobart is only down 0.7 per cent from its peak with regional Tasmania appearing to be currently at its highest recorded values.
“The Gold Coast — on the other hand — seems to be exhibiting very similar search and price increases to Sydney at the moment so it is likely this market will more closely follow the larger city,” she explained.
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