Sydney’s property prices up for the first time in 13 months

SYDNEY’S property prices, the bellwether of the Australia market, advanced for the first time in 13 months in February in a positive sign for home values that have been under pressure from rising interest rates.

Prices in Sydney climbed 0.3 per cent last month, their first increase since January 2022, while Melbourne and Brisbane slipped 0.4 per cent apiece, CoreLogic data showed on Tuesday (Feb 28). That sent the combined capitals index down 0.1 per cent.

The property consultancy’s national home value index fell 0.1 per cent, the smallest decline since May, when the Reserve Bank began its policy tightening cycle.

The increase in Sydney was driven by the upper quartile, or higher-end properties, signalling a possible turnaround in the city’s market as the segment tends to lead both upswings and downturns, CoreLogic said.

Australia’s housing market has been in the doldrums for the past nine months as the RBA embarked on its most aggressive tightening cycle in a decade to try to rein in spiralling inflation. The central bank surprised markets last month when it signalled it wasn’t done yet and expected further hikes to come.

Tim Lawless, CoreLogic’s research director, expressed doubts over whether Sydney’s rebound would spread to other cities, saying the latest price stabilisation coincided with low supply and a rise in auction clearance rates.

“Whether this improving trend can be sustained is highly uncertain,” he said. “While listings currently remain low, we could see housing demand dented further under higher interest rates and lower sentiment.”

The RBA raised its cash rate to 3.35 per cent in February, from a record-low 0.1 per cent in May, as it tries to crush the hottest inflation in three decades. Money market pricing shows rates peaking at 4.2 per cent this year, suggesting at least three more quarter-point hikes.

Lawless said “there is a good chance this reprieve in the housing downturn could be short lived” given expectations of further rate hikes together with fears of a weakening economy.

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While fewer property listings has helped keep prices from falling too far, a slump in consumer sentiment from higher borrowing costs may cool demand further and trigger another round of house-price declines, CoreLogic said. BLOOMBERG