Australian house prices are set to surge again soon if history is any guide.
Sydney’s median house price has plunged by a record 17.4 per cent during the past two years while Melbourne’s equivalent values have plummeted by 14.8 per cent.
The downturns in Australia’s biggest cities are the worst since at least the 1980s.
Real estate data group CoreLogic, however, said property prices were set to surge again, going by the patterns of previous recoveries during the past three decades.
Real estate data group CoreLogic said property prices were set to surge again, going by the patterns of previous recoveries (pictured is a Sydney house auction)
CoreLogic research analyst Cameron Kusher said slowly rising sales volumes are often the first sign of a revival.
‘This is precisely what is occurring at the moment, specifically in Sydney and Melbourne where housing conditions are improving following a sharp downturn,’ he said.
Citing data going back to July 1989, Mr Kusher said property price increases had initially lagged behind changes in sales activity.
‘What is also evident is that the market doesn’t respond immediately, when values start rising, initially at least, it isn’t necessarily occurring in concert with a rise in sales volumes,’ he said.
This was the scenario in the aftermath of the global financial crisis of 2009, with Australia’s housing market taking two years to recover.
CoreLogic research analyst Cameron Kusher said that during the past three decades, house and unit prices had rebounded gradually before surging
From 2012 until the market peaked in 2017, Sydney’s house prices surged by 68 per cent as Melbourne’s values climbed by 54 per cent.
In another good sign, capital city auction clearance rates are again approaching the 70 per cent mark for the first time in two years, albeit off small volumes.
The recovery in sales volumes began in May before the Reserve Bank of Australia cut interest rates in June and July, which took the cash rate to a record low of one per cent.
This has seen standard variable home loan rates fall below three per cent for the first time since the 1950s.
CoreLogic research analyst Cameron Kusher said that sales volumes had risen before prices did when the property market recovered
Your Property Your Wealth buyer’s agent founder Daniel Walsh (pictured with wife Sophie), who has a $4million property portfolio, said lower interest rates and more lenient lending rules would help spark a real estate recovery
AUSTRALIA’S HOUSING MARKET RECOVERY
Sydney, up 0.2 per cent to $864,993
Melbourne, up 0.1 per cent to $710,151
Brisbane, up 0.3 per cent to $533,295
Adelaide, down 0.3 per cent to $461,651
Perth, down 0.5 per cent to $459,227
Hobart, up 0.3 per cent to $482,044
Darwin, up 0.6 per cent to $472,467
Canberra, down 0.3 per cent to $657,686
Source: CoreLogic Home Value Index median house prices for July 2019
The Australian Prudential Regulation Authority has also relaxed a requirement for lenders to model a borrower’s ability to service a loan with a 7.25 per cent mortgage rate.
Your Property Your Wealth buyer’s agent founder Daniel Walsh, who has a $4million property portfolio, said lower interest rates and more lenient lending rules would help spark a real estate recovery.
‘Those two factors, in particular, means more people are eligible to borrow, and can often borrow up to 15 per cent more than they could this time last year,’ he told Daily Mail Australia.
‘Lower interest rates also mean that saving your hard-earned cash in the bank is not so attractive, which will motivate more people to seek better returns elsewhere – such as through strategic property investment.’
Prime Minister Scott Morrison’s Coalition government was also re-elected in May, for a third consecutive term, after successfully campaigning against Labor’s plan to scrap negative gearing for existing properties from next year.
‘You see, at the start of this year, property prices were falling in most major locations, borrowers couldn’t access money, and most of us were worried about who would ultimately wind up in the top job in Canberra,’ Mr Walsh said.
‘Now, of course, we all know the election result, which clearly was a favourable one for the real estate sector.’