House prices resilient, transactions rebound

Capital city median house prices dipped slightly in May for the first month-on-month decline in a year, but markets were nonetheless resilient with transactional activity starting to bounce back.

CoreLogic’s Home Value Index showed a national median house price decline of 0.4 per cent in May, with five of eight capital cities recording a fall in values.

Darwin experienced the largest fall, at 1.6 per cent, followed by Melbourne (-0.9 per cent), Perth (-0.6 per cent) and Sydney (-0.4 per cent).

Adelaide’s median price rose 0.4 per cent, while Hobart was the nation’s best performer in May, with a 0.8 per cent rise.

Transaction levels rose by 18.5 per cent in May, following a 33 per cent fall in April.

CoreLogic head of research Tim Lawless said the data showed markets had not experienced any major correction due to the coronavirus pandemic.

“With restrictive policies being progressively lifted or relaxed, the downwards trajectory of housing values could be milder than first expected,” Mr Lawless said.

“While downside risk remains, the trajectory of the housing market is looking healthier than what we were expecting a bit over a month ago.

“The virus curve has been flattened more quickly and effectively than even the best-case scenario forecasts, meaning some of the most restrictive policy settings have either been lifted or relaxed.

“Consumer spirits have lifted, vendors are starting to test the market and buyer numbers have risen.”

Regional housing markets held steady in May, but Mr Lawless said while some areas avoided a reduction in value, momentum was slowing and the longer-term outlook remained uncertain.

“Eventually government stimulus will wind back and borrower repayment holidays will expire,” Mr Lawless said.

“In the absence of these policies, housing values could come under some additional downwards pressure if economic conditions haven’t picked up towards the end of the year,” he said.

CoreLogic’s analysis is in line with improvements in consumer sentiment, which is rebounding quickly after a COVID-19 related plunge in March.

The ANZ-Roy Morgan consumer sentiment index has risen for 8 consecutive weeks, and is now 42 per cent higher than where it was in late March.

“With consumers feeling more confident, households are better equipped to make high commitment decisions such as buying or selling a home,” Mr Lawless said.

“A lift in housing market activity should also support broader economic activity, with housing turnover providing positive flow-on effects to other sectors including retail, construction and banking.”

Mr Lawless said auction market indicators had also provided evidence of improving conditions. 

The combined capital city clearance rates for the week ending May 24 was 62.7 per cent, bouncing back from a low of 30.2 per cent in late April.

While rents were generally steady in May, the outlook for inner city apartment rentals is becoming uncertain, Mr Lawless said, due to an imbalance between demand and supply.

“With a large amount of new inner city, high-rise apartment projects recently completed, and stalled migration and foreign students arrivals, inner city unit rents are likely to fall more substantially than other sectors of the market,” he said.

“The weakness in rental demand is likely to be compounded by significant job losses and income reductions across the hospitality, tourism and arts sectors, in which a larger portion of workers typically rent.”