Australia’s property market looks set to be boosted by low interest rates
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Australia’s property market is starting to find some momentum, according to the latest monthly price report from CoreLogic.
The pace of decline in Australia’s biggest market slowed, as Sydney house prices edged lower by 0.3 per cent in September.
Still feeling the drag from lockdowns, Melbourne prices fell by 0.9 per cent in September and have now dropped by 5.5 per cent since March.
But there were monthly gains across the other capitals, ranging from 0.2 per cent in Perth to a 1.6 per cent rise in Darwin.
The monthly result marks something of a turnaround in the two-speed housing market which prevailed for much of the last decade.
During that time, prices in Sydney and Melbourne doubled while property gains in most other capitals struggled to increase beyond the rate of inflation.
CoreLogic’s head of research Tim Lawless said the outperformance of smaller capital cities was in line with the fact that those jurisdictions had also had more success controlling the COVID-19 virus.
He also highlighted a shift in demand towards regional areas, particularly if they’re within commuting distance of larger cities.
Looking ahead, there are a number of other indicators that suggest Australia’s property market has stabilised from the worst of the crisis.
As at the end of August, the market was still being assisted by $160bn worth of mortgage deferrals, with a net reduction since the mid-year peak.
Data from APRA showed that a total of $16.55bn worth of mortgages came out of their deferred payment status in August, with $10.75bn worth of new deferrals or extensions.
Auction clearance rates in the Sydney market are consistent with steady price increases at current levels (around 65 per cent), with few signs of excess stock or distressed listings.
And with markets now priced for an extended period of rock-bottom interest rates, CBA says that should help support prices over the medium term.
However, Gareth Aird and the CBA economics team don’t expect the broader market to fully trough until the March quarter of 2021.
In addition, the divergence between different cities will become more stark over that time, with a 12 per cent fall in Melbourne contrasted against net gains in some smaller capitals.
But just like the low-rates outlook for high-growth tech stocks, Aird is more bullish on housing over the medium term.
He said CBA expected national housing values to start rising in the second half of 2021, as “incredibly low interest rates once again become the dominant influence on dwelling prices”.