National property index smashes 16-year record with fifth monthly increase
December 2, 2019
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The national property index has tipped into positive territory in the final month of the year after recording its fifth consecutive monthly increase and its largest monthly jump in more than 16 years.

Values in Sydney and Melbourne continue to lead the surge, where prices rose in November by 2.7 and 2.2 per cent respectively, shaking off the downturn that weighed on property prices up until the May federal election.

Hobart jumped 2.3 per cent, followed by Canberra’s 1.6 per cent lift, while Brisbane, Adelaide and Perth gained between 0.8 and 0.4 per cent over the month.

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Darwin was the only capital to lose ground, slipping 1.2 per cent.

The national index’s rise of 1.7 per cent over the month was enough to lift its annual figures to a gain of 0.1 per cent, with Corelogic head of research Tim Lawless attributing the turnaround to several positive market factors.

“The synergy of a 75 basis points rate cut from the Reserve Bank, a loosening in loan serviceability policy from APRA, and the removal of uncertainty around taxation reform following the federal election outcome are central to this recovery,” he said.

“Additionally, we’re seeing advertised stock levels persistently low, creating a sense of urgency in the market as buyer demand picks up.

“There’s also the prospect that interest rates are likely to fall further over the coming months and an improvement in housing affordability following the recent downturn are other factors supporting a lift in values.”

The rise in values was extending across the country but the surge was concentrated to premium markets, Mr Lawless said.

Sydney and Melbourne’s top quartiles were up 7.4 and 8.1 per cent respectively over the three months, about twice that of each city’s lower quartiles.

“The stronger performance across the higher value end of the market can likely be attributed to a combination of values falling more in this sector during the downturn as well as recent adjustments to serviceability rules which have boosted borrowing capacity,” Mr Lawless said.

The recovery is expected to spread from the higher end of town, however.

“As housing values become less affordable in these high-end markets, demand is likely to ripple outwards to the more affordable areas,” Mr Lawless said.

Realestate.com.au chief economist Nerida Conisbee said the rise in premium suburbs was typical of an early cycle.

“We generally see people flocking to the best suburbs first,” she told news.com.au.

“We’ve seen it show up in search for quite some time. When we look at suburbs people have been looking at, they have tended to be very expensive suburbs, which is quite different to when the market was really strong.”

Buyers are flocking to premium markets across the country.Source:Supplied

Annualising the recent Corelogic figures would suggest the national index is in line for a yearly jump of more than 15 per cent, while Sydney and Melbourne are tracking towards mid-20 per cent surges.

But Mr Lawless said he doubted the high pace of gains could be sustained.

“Considering wages and household income growth remains low, economic conditions are losing momentum, and housing affordability is once again worsening (from an already high base in the largest cities), there are likely to be some headwinds in maintaining such a fast recovery," he said.

“Additionally, the market is yet to be tested on higher supply levels.

“Advertised listing numbers have remained seasonally low throughout spring due to low new listing numbers and an increased rate of absorption as buyer demand lifts.

“With selling conditions looking very strong, there is a high probability that listing numbers will show a material lift through the first quarter of 2020, which will test the depth of the market and likely ease some of the urgency that is contributing to higher prices.”

BIS Oxford Economics executive chairman Robert Mellor said Australians should be cautious when analysing the strong recent data from the leading property research firm.

“We would stress that all the indicators highlight that sales volumes are still down significantly on the levels of a year ago and we expect quarterly price growth to slow significantly over the second half of this financial year to June 2020 as listings increase,” he said.

“However, by June 2020 median detached house prices in Sydney are expected to be up nearly 14 per cent on June quarter 2019 and be only less than 4 per cent below the peak level achieved in June quarter 2017.

“While in Melbourne detached median house prices are expected to be up 12 per cent over the year to June 2020 and be only 2 per cent of the March quarter 2018 peak.”

LOOKING AT TUESDAY’S RBA DECISION

The Reserve Bank of Australia board is due to meet tomorrow, but Ms Conisbee expects the official rate to remain at 0.75 per cent after being slashed three times in 2019.

“I think they will just wait and see what happens through the summer and then pick it up again in February to see how things have changed,” she said.

“Three interest rate cuts haven’t exactly put a rocket up the economy, but I think for now they’ll just watch and wait.”

Ms Conisbee does share the view of most property and economic commentators who believe another cut is likely in the first half of 2020.

“The federal budget in May will be really interesting. It’s highly likely we’ll see tax cuts brought forward and more aggressive infrastructure projects planned,” she said.

“There will be other measures looked at to try and boost economic growth, not just relying on monetary policy to try and push forward the economy.”

Further rate cuts in the new year could help the property market fight off economic headwinds, Mr Lawless said.

“Mortgage rates are already at their lowest level since at least the 1950s, which is one of the main factors supporting increasing market activity. If rates do move lower, no doubt policy makers will be watchful for any triggers that could provoke a policy response limiting housing credit.

“Previous rounds of macro-prudential have had an immediate slowing effect on market activity.”

Is the dramatic rise in values a good thing? Comment below or get in touch @James_P_Hall | james.hall1@news.com.au