And the time has finally come when the Australian housing market has taken a significant step towards recovery! Breaking the record of almost two and a half years, the housing prices have recorded the largest monthly increase in August 2019. A property consultant, CoreLogic, has recently released its monthly home value index that demonstrated a 0.8 per cent rise in the property prices in Australia last month.
An Insight into Housing Prices Data
The dwelling price data released by the firm showed an increase of 1.6 per cent and 1.4 per cent in Sydney and Melbourne property prices, respectively. This was the biggest monthly increase in property values witnessed by Sydney in the last three years and Melbourne over the last two years.
The increase in Sydney and Melbourne?s housing prices was the maximum, followed by a 0.8 per cent rise in Canberra, a 0.5 per cent increase in Hobart and 0.2 per cent improvement in Brisbane. Although these five capital cities experienced a rise, three reported a fall in property prices, including Darwin (by 1.2 per cent), Perth (by 0.5 per cent) and Adelaide (by 0.2 per cent).
The data indicated a significant improvement against the figures reported by the Australian Bureau of Statistics (ABS) for the March 2019 quarter. ABS provided the following data on housing prices in June this year:
The official estimates released for the March Quarter 2019 indicated a fall in the quarter on quarter housing prices across all the eight capital cities of Australia. Also, Hobart was the only city to observe a rise in housing prices at that time.
Reasons for Housing Price Improvement ?
We have seen that the property prices have marked a remarkable achievement in August 2019, but what might be the reasons for this surprising recovery? The following are the possible reasons for the housing prices retrieval:
Interest Rate Cut: With the RBA?s recent moves on reducing interest rates to a lower level of 1 per cent, mortgage lending has become cheaper for new home buyers. The lower interest rates are likely to facilitate the purchase of more houses, thereby raising their prices.
Rise in Auction Clearance Rates: The auction clearance rates are experiencing an upward trend in Australia, showing signs of a bounce back in the property market. As we wrote in our previous article, the preliminary auction clearance rate improved to 68.9 per cent during the first week of July 2019, with 945 properties listed for auction in the country?s capital cities. This was a huge progress in comparison to the prior corresponding?s period figure of 52.6 per cent.
Ease in Lending Rules: Giving an opportunity to new home loan buyers, the Australian Prudential Regulation Authority has recently scrapped a minimum 7 per cent floor in mortgage serviceability assessments in an effort to revive the sluggish economy.
The effect of easing mortgage lending rules was visible on the recently released official statistics on lending commitments to households for June 2019. The country witnessed a rise in lending commitments to households by 1.3 per cent in June this year for the first time in over a year. The rise was driven by lending to households for owner occupier dwellings exclusive of refinancing, that increased by 2.1 per cent during the month.
Re-Election of Morrison Government: In a miraculous win, Mr Scott Morrison?s Coalition Government was re-election in the federal election held in May this year. The decision was welcomed by many investors who noticed some of the proposed Labor?s policies as detrimental. The previous Labor government wanted to make some changes in negative gearing and capital gains discount, that was likely to put a pressure on housing prices. With the election of Morrison?s government, an optimistic outlook was created for the Australian property market.
A Look at Recent Dwelling Approvals Data
On the one hand, the Australian housing market is showing traces of restoration, while on the other hand, the recently announced dwelling approvals data provide a different scenario. ABS released the building approvals statistics for July 2019 last week, that highlighted a fall in dwelling approvals by 9.7 per cent in July 2019 in seasonally adjusted terms.
The data revealed that the number of dwellings approved fell majorly in Victoria and New South Wales by 24.3 per cent and 17.5 per cent, respectively. The decline was driven by a fall in private dwellings excluding houses by 18.4 per cent and private house approvals by 3.3 per cent.
The recently released statistics on the Australian housing market show that though the market is making progress in some measures, it lacks in others. However, the RBA and Morrison Government?s moves are expected to reverse the downward trend in the property market completely in future. To what extent and how soon will the monetary and fiscal policies will help in this revival would be an interesting watch.
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