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‘Striking turn’: Housing market marks sharp change

·3-min read
Typical Australian suburb from above in autumn
Typical Australian suburb from above in autumn

Australia’s median home value sunk 0.1 per cent over September, marking its smallest decline since May this year.

All capital cities bar Sydney and Melbourne recorded increases in values, with property analysis firm CoreLogic describing this as a “striking turn in housing market sentiment”.

Sydney values slumped 0.3 per cent while Melbourne values toppled 0.9 per cent. However, Adelaide saw home values jump 0.8 per cent and in Brisbane values rose 0.5 per cent.

But it was Darwin that saw the greatest increase in values, up 1.6 per cent. Canberra and Hobart home values increased 0.4 per cent and Perth values increased 0.2 per cent.

CoreLogic head of research Tim Lawless said that while Melbourne’s slump – a 5.5 per cent decline since March – has dragged the index down, plans to lift restrictions should see buyer activity grow in October.

Image: CoreLogic
Image: CoreLogic

Regional markets strong

Combined regional markets grew 0.4 per cent in value, compared to the combined capitals’ fall of 0.2 per cent, thanks to a combination of lifestyle choices and demographic trends.

“From a cyclical perspective, regional areas weren’t recording the same growth conditions pre-Covid, so home values in these markets are often more affordable, and don’t have a high base to fall from,” Lawless said.

“Anecdotally we are also observing a transition of demand away from the cities towards the major regional centres, particularly those that are adjacent to the larger capitals where residents can commute back to the cities if required.

“Remote working arrangements are no doubt a factor in supporting demand in these markets, but lifestyle opportunities and a desire for lower density housing options are also playing a part.”

Challenges ahead

While the housing market downturn has been relatively subdued, an end to mortgage deferrals and reduction in JobKeeper and JobSeeker payments pose significant headwinds.

CoreLogic said it is “logical to assume” that a rise in distressed borrowers will come as repayments resume.

But, Lawless noted, this hasn’t been seen so far.

“The aggregate effect of low mortgage rates, and the prospect that rates could fall further, low inventory levels, government incentives and improving consumer sentiment seems to be outweighing the negative economic shock brought about by the pandemic, “ Lawless said.

And as listings remain 22 per cent below where they were a year ago, these tight inventory levels are actually creating a sense of urgency.

“The imbalance between available supply and housing demand is one of the reasons why housing values have hardly fallen through the Covid-19 period so far, and helps to explain the recent upwards trend in values across some cities,” Lawless said.

“We aren’t seeing any signs of a rise in distressed listings or stock starting to pile up in the market. In fact, the opposite seems to be true, where new listings are being absorbed by the market faster than the rate at which they are being added.

“This trend will be important to monitor over coming months as fiscal support tapers and the financial situation of borrowers taking a repayment holiday is assessed by their lender. A rise in urgent or distressed listings would provide a further test for the resilience of housing values.”

He said the Government will likely have a round of spending initiatives and stimulus measures targeting housing and investment in the coming Budget on Tuesday 6 October, while suggestions the Reserve Bank of Australia will cut rates lower may also support the housing market.

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