Property prices stabilised in July as the housing market embraced dual rate cuts and improved credit availability, but economists have warned not to expect a boom in the near future.
The CoreLogic July 2019 home value index shows national dwelling values were flat over the month – stabilising after a consistent trend towards smaller month-on-month declines – helped by a subtle price rise across most capital cities.
Prices across the state capitals rose by a combined 0.1 per cent in July, breaking almost two years of losses, including a monthly increase of 0.2 per cent in Sydney, Melbourne and Brisbane, and an easing decline in Adelaide, Perth and Canberra.
CoreLogic head of research Tim Lawless said the figures suggested a new floor had been found following back-to-back interest rate cuts in June and July and a post-federal election boost.
But he warned against expecting a “‘v-shaped’ recovery” in the market.
“The July home value index results provide further confirmation that the housing market has reacted positively to the recent stimulus of lower mortgage rates and improved credit availability, however the response to-date has been relatively mild,” Mr Lawless said on Thursday.
Mr Lawless said the ongoing tightness in housing credit is expected to keep a rapid rebound in housing values at bay, despite the lowest mortgage rates since the 1950s.
“Housing credit polices remain much tougher than they were prior to the royal commission as lenders continue to move away from the Household Expenditure Measure and examine borrower spending behaviours and expenses more closely,” he said.
The July result eased the annual rate of decline across Australia’s combined capital cities to 7.3 per cent, having ballooned to a 8.4 per cent annual decline in the 12 months to May.
Corelogic said the primary drivers for the turnaround were Australia’s two largest cities, Sydney and Melbourne, where values have ticked higher over the past two months, taking values 0.3 per cent off their floor in Sydney and 0.4 per cent higher in Melbourne.
“Despite an unprecedented amount of new apartment stock entering the market, Sydney and Melbourne unit values have consistently outperformed the detached housing sector through the downturn, and this trend is continuing into the recovery phase,” Mr Lawless said.
Price gains in Hobart accelerated from 0.2 per cent to 0.3 per cent in July, while Darwin property prices swung from a 0.9 per cent monthly decline to a 0.4 per cent monthly gain.
The 0.2 per cent lift in Brisbane values was the city’s first month-on-month rise since November last year.
Combined regional housing values fell by 0.2 per cent for the month, easing from a 0.4 per cent decline in June.
AMP chief economist Shane Oliver said it was clear the coalition’s federal election win in May had given the market confidence, via the removal of threats to negative gearing and the capital gains tax discount.
Dr Oliver said positive headlines around the relaxation of the 7.0 per cent mortgage rate serviceability test played a role.
But he warned the nation’s economic climate was vastly different to that which accompanied the RBA’s last easing cycle in 2011, which laid the foundations for prices to climb dramatically to a mid-2017 peak.
“By contrast today, household debt to income ratios are much higher, bank lending standards are much tighter such that a return to rapid growth in interest only and investor loans is most unlikely,” Dr Oliver said.
“So we don’t see a return to boom time conditions and expect constrained low single digit price gains through 2020.”