Yahoo Finance Are we about to see a turnaround in Aussie property prices?
Home-owners and sellers can rest easy knowing the pace of declining home values continued to reduce in May.
CoreLogic’s home value index results showed national dwelling values were down, on average, 0.4 per cent over the month of May, which represents the smallest month-on-month fall in a year.
Related article: WATCH: What to do in a declining property market
Related article: How to snap up your first investment property
The improvement was primarily 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, according to CoreLogic’s head of research, Tim Lawless.
Home values in Sydney and Melbourne were 0.5 per cent and 0.3 per cent lower over the month of May, which is the smallest decline in values since March last year.
But while Sydney and Melbourne prospered, Lawless said other cities where housing market conditions were more resilient to the downturn saw the opposite trend.
For example, Hobart home values tracked lower for two months running, taking the rolling quarterly rate of change into negative territory for the first time since early 2016.
This slowing rate of decline was visible in higher auction clearance rates through the month, where Sydney clearance rates broke the 60 per cent mark for the first time in a year.
“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,” Lawless said.
Take a look at home values in Aussie capital cities across the month of May, the quarter and the year.
But, the property market still isn’t out of the woods yet, and the Aussie housing market remains in a broad-based downturn.
The only city to avoid a slip in housing values over the month was Adelaide, which posted a 0.2 per cent growth in value.
Over the three months to May, the best performing capital city was Canberra, where home values increased 0.2 per cent, while Darwin was the worst performing city with a decline of -3.3 per cent.
What’s the outlook going forward?
Lawless said the federal election brought a variety of outcomes and announcements that were 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 amongst 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 (who comprise around 60 per cent of mortgage originations), 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 per cent deposit, will kick off in January next year.”
This, combined with the prospect of a drop in the interest rate serviceability test from 7.25 per cent to 2.5 per cent, a well as lower mortgage rates, would support housing market conditions.
But, while the outlook is looking more positive now than it was pre-election, Lawless said there are a few headwinds still at play, especially in the credit space.
“Comprehensive credit reporting is providing lenders with greater visibility around borrower finances and overall debt levels, and progressively lenders are reducing their exposure to borrowers with high debt levels relative to their income,” he said.
Make your money work with Yahoo Finance’s daily newsletter. Sign up here and stay on top of the latest money, news and tech news.