The surprise monthly uptick in Sydney dwelling values last month could indicate a positive trend for housing values — does this mean that the bottom has already happened or is it too early to tell?
CoreLogic’s Daily Home Value Index (HVI) showed that as of the first half of March, the shift in Sydney is starting to spread across the some of largest capitals.
Over the 15-day period, Sydney led with a 0.5% growth, followed by the 0.2% gains in Melbourne and Perth. Brisbane had a flat result while Adelaide recorded a 0.2% decline.
On a rolling four-week basis that would provide a useful proxy for monthly change, Sydney, Melbourne, and Perth reported gains.
CoreLogic research director Tim Lawless said the current supply of homes is a crucial driver of the apparent return of home prices to the positive trend.
“A low advertised supply is likely to be a central factor keeping a floor under housing prices despite a clear drop in demand. At the same time, we have also seen a rise in auction clearance rates back to around the decade average,” he said.
Listings in capital cities over the past four weeks were 19.9% lower than the previous five-year average for this time of the year.
Mr Lawless said any sign of a larger-than-normal level of new listings would imply that prospective sellers are not able to wait out the downturn any longer.
“A rise in advertised supply to above average levels could be a signal this recent trend of growth has run out of steam,” he said.
Another driver appears to be the surge in permanent and long-term migrants.
“While most of the housing demand from overseas migration is likely to flow into the rental market, with vacancy rates so tight, we may be seeing a higher-than-normal portion of long-term or permanent migrants choosing to buy rather than rent,” Mr Lawless said.
Despite these developments, however, Mr Lawless believes the housing market is still facing some considerable downside risk, which makes it to early to call it the bottom of the current cycle.
“Interest rates may rise further from here, as well as the fact that we are yet to see the full impact on households from the aggressive rate hiking cycle to date,” he said.
Economists from some major banks are expecting the cash rate to peak at 4.1%.
“Additionally, economic conditions are set to weaken through the middle of the year, as household savings buffers are being depleted and labour markets are likely to loosen further,” Mr Lawless said.
“Given the uncertainty ahead of us, the next few months will be critical to understand whether the housing market is indeed moving through an inflection point or if it is simply the eye of the storm.”
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Photo by Steve B on Pixabay.
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