Property Prices Rise in Australia in December 2019 Qtr Ahead of Coronavirus Pandemic

The ABS’ recent statistics have revealed a surge in the property prices in almost all the capital cities in the December quarter 2019. The nation has recorded a considerable quarterly rise of about 3.9 per cent in the residential property prices in Q4 2019, owing to substantial price increases in Melbourne and Sydney of 5.2 per cent and 4.7 per cent, respectively.

It was a second consecutive quarter of strong growth for both Sydney and Melbourne, which observed a rise of 5.2 per cent and 5.5 per cent, respectively in house prices. It is worth noting that both these capital cities have demonstrated significant increases of 3.7 per cent (Sydney) and 4.1 per cent (Melbourne) in residential property prices over the year to the December quarter 2019.

What’s more fascinating is that the turnaround in the Australian housing market has spread to almost all the other capital cities except Darwin, wherein residential property prices slipped by 0.8 per cent in the December quarter.

In addition, Australia’s residential dwellings have seen their largest rise since the commencement of the series in the September quarter 2011, in Q4 2019, soaring by $294.4 billion to $7,212.6 billion.

ABS Results Consistent with Other Housing Market Indicators

As per the ABS Chief Economist, Mr Bruce Hockman, the recent results are consistent with other housing market indicators such as sales transactions and new lending commitments to households, which have been rising over several months.

The latest ABS data on lending indicators showed an improvement in the seasonally adjusted value of new loan commitments for housing by 4.6 per cent in January 2020. Continuing the strong growth witnessed in 2019, the number of loan commitments to owner occupier first home buyers also surged by 3.2 per cent in January 2020.

The rise in value of new loan commitments for housing in January 2020 followed an increase of 4.4 per cent in December 2019, reflecting its strong momentum.

The ABS notified that the value of housing loan commitments rose at the fastest pace in January since the turning point in lending activities in mid-2019. The rise was continued to be backed by occupier housing, which soared by 5 per cent, marking the eighth consecutive month of uninterrupted growth.

Housing Market Revival Continued in February 2020

The Australian property market seems to be continuing the pace of capital gains, as depicted by CoreLogic’s Feb’20 Home Value Index, which rose by 1.1 per cent over February 2020. The property consultant has recently confirmed that five of Australia’s eight capital cities reached a record-high level in housing values, signifying a robust comeback of housing boom.

As per the index results, Sydney and Melbourne continued to observe the strongest capital gains of 1.7 per cent and 1.2 per cent, respectively over the month. On the other hand, the other capital cities recorded a modest rise except Darwin, wherein values slipped by 1.8 per cent.

Australia’s second-most populous city, Melbourne, observed a house price increase of 1.2 per cent in February, surpassing the prior peak achieved in September 2017. Besides Melbourne, home values in Brisbane, Canberra, Adelaide and Hobart also hit new record highs during the month.

Recent Auction Results Reveal a Different Story

While house prices are improving consistently in Australia, the rapid spread of COVID-19 might result in an economic fallout, halting the upswing. This can be seen from the property consultant’s recent auction results, which demonstrated signs of buyers moving away from the market amid fear of contracting the virus.

The property consultant is expecting auction clearance rates to fall below 70 per cent for the second week of March 2020 as the economic uncertainty has risen on the back of global health crisis. Moreover, a ban on the large public gatherings by the Morrison government is stimulating the speculations.

It is imperative to note that the nations’ property market has been relatively resilient so far, with preliminary auction clearance rate recorded at 70.6 per cent for the last weekend. However, housing activity is anticipated to fall in the coming weeks, driven by slipping confidence and rising uncertainty amidst the coronavirus outbreak, inducing buyers to adopt buy and see approach in a weaker market.

Certainly, there has been thinning of buyers in Australia over COVID-19 fears; however, the existing market scenario is offering a golden opportunity for property investors to grab their favourite real estate stocks at discounted prices. Moreover, the property market is still exhibiting signs of recovery and its largely uncertain how and to what extent the coronavirus pandemic will impact the nation’s property market.

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