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Australia's housing market heating up again
AFTER a two-year slide, Australian house prices look to have bottomed out, sending buyers flocking back to the market.
Case in point - an auction for a four-bedroom house in the Sydney suburb of Ryde on Saturday attracted about 100 people. Spirited bidding pushed offers A$226,000 (S$212,000) above the reserve price, before it finally sold for almost A$1.5 million - a buzz last seen during the boom years.
"A lot more people now are getting concerned that things are going to go up in the next six to 12 months so they're trying to buy now," said real estate agent Phil Allison, who handled the sale.
As recently as six months ago, it was difficult to elicit a single bid at an auction for a house just around the corner, he added.
The sudden turnaround in sentiment can be traced to three factors: the central bank's back-to-back interest rate cuts which have pushed mortgage rates to record lows, the regulator's loosening of mortgage stress tests, and the surprise re-election of Prime Minister Scott Morrison's government in May, which killed off the opposition Labor Party's plans to wind back tax breaks for property investors.
The nascent rebound is a rare bright spot in an otherwise sluggish economy, which has been beset by stagnant wages and a sharp slowdown in growth. Rising home prices may help underpin consumer spending by making homeowners feel wealthier.
Dwelling values in Sydney, the nation's largest property market, have risen in each of the past two months, according to CoreLogic.
That ended a near two-year slide that saw prices tumble 15 per cent from their July 2017 peak, and foreshortened a slump economists had forecast to extend into next year. Prices also rose in Melbourne, Brisbane, Hobart and Darwin last month.
"We think house prices will rise at single-digit rates in coming quarters and it's that combination of lower interest rates and looser prudential settings that is the key driver," said Paul Bloxham, HSBC Holdings' Australian chief economist.
Commonwealth Bank of Australia, the nation's largest home lender, also said the housing market has turned the corner.
"We feel like the housing market is starting to stabilise and may slightly improve from here," the bank's chief executive officer Matt Comyn said Wednesday after it announced its earnings. "We see modest price increases and a modest increase in credit growth overall."
The upswing in prices has also revived a fear of missing out among homebuyers, last seen during a frenzied boom that pushed Sydney prices up 75 per cent between 2012 and mid-2017.
Clearance rates at auctions - the most common way of selling a house in Australia - climbed to 75 per cent in the city in the first week of August, compared to 52 per cent a year ago, according to CoreLogic.
Still, the rebound is not good news for everyone. Despite the two-year slump, Sydney is still home to one of the world's most expensive property markets, with a median house price of A$864,993, according to CoreLogic. Even now, home values are only back to where they were in early 2015.
Not everyone is convinced the property market has bottomed, however. More houses may soon hit the market as the peak Spring selling season starts, and Sydney and Melbourne are set to be swamped by a glut of apartments, potentially making it a buyers' market again. BLOOMBERG