By Mina Martin
Australian housing values recorded a second consecutive increase last month, after falling -9.1% between May 2022 and February 2023, signalling that the market may have already bottomed out.
CoreLogic national Home Value Index (HVI) lifted by 0.5% in April, after a 0.6% lift in the prior month to be 1% higher over the past three months.
Sydney led the positive turn in housing conditions, posting a 1.3% rise in dwelling values in April and with values increasing each month since February. Sydney values are now 3% higher than the recent trough recorded in January.
The four largest capital cities all posted a rise in housing values over the rolling quarter, adding further evidence that a positive growth trend has emerged.
Tim Lawless (pictured above), CoreLogic’s research director, said it was becoming increasingly clear the housing market has moved through an inflection point.
“Not only are we seeing housing values stabilising or rising across most areas of the country, a number of other indicators are confirming the positive shift,” Lawless said. “Auction clearance rates are holding slightly above the long-run average, sentiment has lifted, and home sales are trending around the previous five-year average.”
The more positive trend in housing values comes as the imbalance between supply and demand worsens.
“A significant lift in net overseas migration has run headlong into a lack of housing supply,” Lawless said. “While overseas migration would normally have a more direct correlation with rental demand, with vacancy rates holding around 1% in most cities, it’s reasonable to assume more people are fast tracking a purchasing decision simply because they can’t find rental accommodation.
“Many prospective vendors have stayed on the sidelines through the downturn, keeping inventory at below average levels and providing sellers with some leverage at the negotiation table.”
Lawless said the increasing expectation the rate hiking cycle is over, or nearly over, in the wake of a sharp decline in values was another factor that was likely supporting housing demand.
“This could be contributing to a broader perception that the market has bottomed out, and for those attempting to time the market, that it is considered to be a good time to buy,” he said.
“As interest rates stabilise there is a good chance consumer sentiment will improve, bolstering housing market activity from both a purchasing and a selling perspective.”
Notably, the trend towards more positive housing market conditions comes at a time when interest rates remain well above average.
“The last time we saw housing values trending higher through a rising interest rate environment was during the mid-to-late 2000’s when the mining boom was underway,” Lawless said. “This period was also characterised by surging net overseas migration that contributed significantly to housing demand.”
There was greater diversity in the regional markets, but the trend remained one where values were generally stabilising or rising. Of the state regions, only Regional NSW (-0.3%) and Regional Victoria (-0.4%) posted a fall in housing values over the month, but the quarterly trends in these regions were on a clear trajectory towards a stabilisation in values.
Despite housing conditions becoming more positive, values across most regions were still well below their recent cyclical highs.
In Hobart, values are yet to improve, falling -13% – the largest drop from the recent market peak. Sydney dwelling values had recorded a -13.8% fall from the market peak to recent trough, but saw values lift 3% over the past three months, leaving the market -11.2% below the recent high. Brisbane has seen the third largest decline, with values holding -10.7% below their recent peak.
A number of regions hit a new cyclical high in April. Strong growth over the past two months led to Peth recovering all its recent declines, taking values to a new record high. Regional SA and Regional WA also posted new cyclical peaks, although Regional WA values remained -13.7% below the record highs recorded in early 2008, CoreLogic reported.
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