The final round of 2019 housing data clarified what many property-watchers already suspected: the Australian real-estate market has conclusively returned to growth.
According to CoreLogic’s Home Value Index, prices rose 1.1 per cent nationally during December – the sixth consecutive monthly gain, with November having recorded the largest one-month gain since 2003. It was a strong end to a three-month period which saw the fastest rate of national dwelling value growth since 2009. Of the state and territory capitals in December, only Darwin recorded a decline in prices.
‘It’s undeniable that selling conditions were quite strong throughout the second half of 2019,’ says CoreLogic’s research director Tim Lawless. ‘Auction clearance-rate percentages were typically up around the mid-to-high-70s, average selling time came down and discounting rates have reduced.’
He adds, ‘What’s interesting though is that listing numbers in the marketplace were relatively low – much lower seasonally than what we’d expect coming through spring and early summer. As we move into 2020, I think we'll see more stock hitting the marketplace, as would-be sellers become more confident.’
Independent economist Saul Eslake believes price growth will continue throughout the first half of 2020. ‘I don’t think what we saw late last year was a blip,’ he says. ‘I think it reflects the fact that interest rates have fallen three times.’
According to Eslake, another supportive factor was the election of a federal Coalition government in May. That result put to bed Labor’s plan to reform the tax treatment of property investment.
Eslake believes falling interest rates will continue to support property prices in 2020. ‘The odds probably favour at least one more downward movement [in rates], and I would think it would come in the first half of 2020,’ he says.
Dwindling supply could also be a factor. ‘The approvals data are telling us that there’s a significant downturn in the construction of new dwellings in the pipeline,’ Eslake says, ‘so we may see the re-emergence of a shortage of housing relative to the underlying demand for it.’
Eslake points out that national prices remain 4.1 per cent below the peak levels reached in 2017, lending further weight to the idea values will continue to rise during 2020. However, there are signs the pace of growth this year may not match what was achieved in the final months of 2019.
‘According to the Westpac Consumer Sentiment Index, we’ve seen consumer confidence fall by about 6 per cent since the middle of the year, when interest rates started falling,’ Lawless says. ‘When you see consumers not as confident in their household finances or in the country’s economy, that’s going to impact on high-commitment decisions such as buying a home.’
What’s more, investors are still largely absent from the market. ‘Based on the ABS housing finance data, investors were only about 28 per cent of mortgage demand in October, which is a record low,’ says Lawless. ‘And this is despite the fact there should have been some certainty returning to the investment space following the federal election, and the removal of all the taxation-reform discussion. We simply haven’t seen investors bouncing back into the marketplace as strongly as owner-occupiers.’
He adds, ‘Maybe it’s because investors are a little bit less certain about the medium- to long-term trajectory of the market’.
On balance, both Eslake and Lawless believe the rise in values in the first half of 2020 will be moderate. ‘I don’t expect they’ll keep rising at the pace they did in November, but I would think the most likely scenario is for a modest upward drift,’ says Eslake.
‘You have to hope that this will be modest,’ he continues. ‘I don’t think it’s really in anyone’s broader interests for there to be a return to the unsustainable patterns we were seeing between 2013 and 2017.’
Lawless says all will become clear between now and March. ‘I think we will see more stock come on the market in the first quarter of 2020, and that will be the real test of the depth of demand,’ he says. ‘My guess is that higher stock levels will probably remove some urgency from the market and dampen what’s been a surprisingly strong and unsustainable rate of rebound in housing values.’
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