CoreLogic figures out today suggest Australia’s property downturn is near the end of its slope, with the pace of declines in May the smallest fall in a year.
Home price falls are continuing to slow in Australia’s two biggest cities, as high clearance rates prompt some property analysts to predict the market will bottom out this year.
The CoreLogic May 2019 home value index results show the pace of declines eased further in May, continuing a trend that’s been evident since the start of the year.
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National dwelling values fell by 0.4% over the month, the smallest month-on-month decline since May 2018.
CoreLogic Head of Research Tim Lawless said Sydney and Melbourne are driving the drop.
“This improvement is primarily being driven by a slower rate of decline in Sydney and Melbourne where housing values were previously falling at the fastest rate of any capital city,” he said.
Sydney house values were 0.5% lower over the month, while Melbourne values were 0.3% lower, representing the smallest decline in values across both cities since March last year.
“In other cities, where housing market conditions have generally been more resilient to a downturn, the trend is the opposite,” Mr Lawless added.
Adelaide was the only city to avoid a slip in housing values over the month, rising by 0.2%.
The slower rate of decline is evident in the recent higher auction clearance rates. The last week of May saw Sydney’s clearance rates push the 60% mark for the first time in a year. Melbourne clearance rates have held above 60% for three weeks now.
“Although clearance rates remain low relative to several years ago when housing market conditions were much stronger, the improved performance at auction aligns with the easing rate of decline,” Mr Lawless said.
Sydney’s preliminary clearance rate over the weekend hit a healthy 66.1%, compared with last week’s final clearance rate of 62.1% according to CoreLogic figures.
Melbourne’s preliminary clearance rate over the weekend hit 64.0% after last week’s final clearance rate just fell short of 60%.
Federal election outcome removes market uncertainty
Mr Lawless said the variety of outcomes and announcements to come out since the federal election are likely to have a positive effect on housing market conditions.
“The federal election outcome has removed the uncertainty surrounding taxation reform which should see an improved level of confidence among home owners and prospective buyers, particularly investors,” he said.
“We now have some certainty around the initiatives announced in the federal budget, a consistent commission structure for mortgage brokers, and the eventual stimulus for first home buyers in the form of a federal government deposit guarantee, which although limited to 10,000 participants with at least a 5% deposit, will kick off in January next year.”
Lower mortgage rates are another factor set to boost housing market conditions. The Reserve Bank of Australia (RBA) is widely expected to cut interest rates on Tuesday for the first time since August 2016.
Mr Lawless said if the cuts do pass, it will have a positive influence on the housing market.
“Lower interest rates may not provide the same level of stimulus as what we have seen in the past due to tighter credit policies, but no doubt, lower rates will still provide some positive influence over the housing market.”
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