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Australian home price dive levels out as auctions lift market
AUSTRALIAN home prices look to be finally finding a floor as a revival in auction demand put Sydney on track for its first monthly gain in two years.
An end to the relentless losses could be a lifesaver for the economy given the erosion of housing wealth has been undermining confidence and consumer spending power. Australia's housing stock is valued at A$6.8 trillion (S$6.4 trillion), or almost four times the country's annual gross domestic product.
Preliminary data from property consultant CoreLogic out on Monday showed that home prices across the capital cities were steady last week, breaking months of steady declines.
Values in Sydney actually edged up 0.3 per cent for the month the June 15, a major turnaround if sustained. Prices in Sydney have been falling since mid-2017 and are down around 15 per cent from their peaks.
The better performance coincided with a marked pick up in clearance rates at property auctions, a popular method of sale in Sydney and Melbourne. Of the 522 auctions in Sydney held last week, a whopping 74.7 per cent found buyers.
"It's looking like this week will be the most successful result the city has seen since at least April last year, or possibly longer," noted CoreLogic. "One year ago, a clearance rate of just 49.4 per cent."
Melbourne recorded a clearance rate of 67.9 per cent, while across all the capital cities 66.4 per cent of sales found buyers. The results suggest would-be owners have reacted positively to cuts in mortgage rates after the Reserve Bank of Australia lowered its cash rate to a record low of 1.25 per cent earlier this month, and left the door open to further easing.
Australia's banking regulator added to the uplift by proposing to relax rules for how banks check people's ability to service home loans, essentially allowing them to borrow more.
Also likely aiding sentiment was the surprise election victory of the conservative Coalition government last month and its pledge to keep tax breaks for home investment. The opposition Australian Labor Party had campaigned on removing or curbing certain housing perks.
"This was an important test for the market," said Matthew Hassan, a senior economist at Westpac, of the auction results. "As they stand, the preliminary results are well clear of the 50-55 per cent range consistent with price stability and point to price gains of 2-3 per cent a quarter."
One caveat was that the number of auctions was still relatively low, he added. Some 1,487 auctions were held last week, compared to 2,002 at the same time last year. REUTERS