Principal analysts of property data, such as CoreLogic, SQM Research, and Proptrack, believe Australia’s housing downturn has ended. According to CoreLogic’s Eliza Owen, the available data suggests the national housing market flattened out in early March, with Sydney bottoming out a month earlier.
“A record return in international migration was unanticipated, and it has resulted in housing demand far exceeding supply, which has contributed to the beginning of a more sustained price increase,” said Owen. Director of Orchard Lending, Kevin Orchard, concurs, stating that “immigration will be stronger than developers anticipated 12 to 24 months ago, and we saw in the 2000s how unexpected immigration can provide a price boost.”
Housing Auction Indicators
Louis Christopher, managing director of SQM Research, argued that strengthening auction markets and rising vendor asking prices are unmistakable indications that the Sydney and Melbourne housing markets have reached bottom. Christopher stated, “I believe the worst is over for Sydney and Melbourne.” There is still inflation in the market, and historically, housing has been a decent hedge against inflation. We are also experiencing unprecedented population growth, resulting in an increase in the underlying demand for housing.
You cannot contend against the evidence. Since 7 February, the CoreLogic daily dwelling values index has increased 1.3%, propelled by a 2.4% increase in Sydney. Historically, auction clearance rates have been a strong preceding indicator for home prices, and they have rebounded significantly.
The expansion of new mortgage commitments has also rebounded, although not as significantly as prices. Lastly, housing price expectations in Westpac’s consumer sentiment report continue to rise and tend to precede actual prices (chart by Alex Joiner at IFM Investors):
Home Price Anticipations
With Australia experiencing record-high immigration and a record-tight rental market, and with the RBA at or near the peak of the interest rate cycle, the seeds have been sowed for rising home prices. Kevin anticipates prices may surge when the RBA inexorably reduces interest rates later this year, which will be followed by the APRA inexorably reducing the 3% mortgage serviceability buffer. When these occurrences occur, financing capacity will increase, and home prices could surge. Read more about current house price trends from Core Logic