A slowdown in the correction of house prices offers hope to borrowers and investors alike, but the devil is in the detail.
As the housing market continues to show signs of weakness at a national level, there were some green shoots in February as buyers stepped in to offer some modest support.
The rate of decline for CoreLogic’s national Home Value Index (HVI) decreased dramatically. Whereas January saw a -1.0% decline, the fall last month was a more muted -0.1%.
February’s result represents the smallest monthly decline since the Reserve Bank of Australia began hiking interest rates back in May, 2022.
Surprisingly, there was even a positive result in the mix for the nation’s most prolific capital city market, but the data should also be read with a grain of salt as stock levels coming onto the market remain exceptionally low.
Capital Cities: Review
As alluded to above, Sydney’s housing market bucked the trend last month and delivered its first round of positive growth in roughly a year.
Dwelling prices in Sydney gained 0.3% across the course of the month, taking the median dwelling value back above the $1 million mark. Given the size of the market in Sydney, the result helped prop up the national property sector.
Elsewhere, Hobart was the worst performing capital city in February, with dwelling prices falling by -1.4% month-over-month.
On the other hand, every other capital city recorded a modest contraction, with declines at or below -0.5% over the month.
In the case of Darwin, the Northern Territory capital saw its price decline accelerate compared with the month prior, making it the only capital city to suffer such a fate.
After another fall, albeit smaller than the one in January, Melbourne’s housing values are now more or less back at pre-pandemic levels.
By way of comparison, Sydney prices are still nearly 8% higher than levels seen in March, 2020. The biggest beneficiary throughout the pandemic remains Adelaide, where dwelling prices are still more than 41% ahead of where they were three years ago.
Overall Market: Review
At first glance, the results provide an optimistic backdrop regarding a potential stabilisation in property prices.
However, the key factor at play remains the fact that advertised supply is still at low levels. New advertised listings across capital cities are sitting -17.0% below the same level last year, and almost -12% below the five-year average.
Auction clearance rates are improving, even hitting yearly highs in some regions. While this is acting as a potential floor for house prices, the test will be when more stock comes onto the market.
As the RBA continues to hike rates, and a looming mortgage ‘cliff’ on the horizon in the second half of the year, it is our view that demand will be tested, particularly as access to finance becomes more constrained.
Furthermore, supply could also increase amid expectations of a looser jobs market and mortgage strain. This leads us to believe that it would be premature to call a bottom for property prices at this time.
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