A rude wake-up call for the Reserve Bank, with all those gloomy forecasts of a big slump and problems for borrowers with little equity blown out of the water by a turnaround in house prices for April.
After falling 9.1% between May last year and February this year, CoreLogic thinks Australian house prices “have bottomed out” after posting a second monthly rise in a row in April.
CoreLogic’s National Home Value Index (HVI) rose 0.5% in April, following a 0.6% lift in March to be 1.0% higher over the past three months.
Sydney was up 1.3% in April and is leading the positive turn in housing conditions, with dwelling values rising each month since February.
Sydney values are now 3.0% higher than the recent trough recorded in January.
In further evidence that a positive growth trend has emerged, the four largest capital cities all recorded a rise in housing values over the rolling quarter, according to CoreLogic data.
With a strong labour market and easing, but sticky inflation that’s still too high, the Reserve Bank is still expected to pause today on another rate rise, leaving the cash rate at 3.6%.
But you have to wonder that if there’s a bigger rise in house prices in May, another solid jobs report in a fortnight or so’s time and then another small fall in inflation in the monthly indicator for April at the end of the month, then a rate rise could emerge from the June policy meeting.
The RBA and Governor Philip Lowe have made it clear they are starting to be concerned about the surge in migration and the impact it will have on inflation, jobs, wages, property prices and demand generally.
A couple of analysts though wonder if a surprise 0.25% rise today might bring a dose of realism back to markets – especially property.
The rise in April saw the Commonwealth Bank forecast a 3% rise for 2023 and a 55 rise in 2024, while AMP chief economist, Shane Oliver thinks prices will be flat this year but sees them up 5% next year as well.
CoreLogic’s Research Director, Tim Lawless wrote in a commentary that it is becoming increasingly clear the housing market has moved through an inflection point.
“Not only are we seeing housing values stabilising or rising across most areas of the country, a number of other indicators are confirming the positive shift. Auction clearance rates are holding slightly above the long run average, sentiment has lifted and home sales are trending around the previous five-year average,” he said.
“A significant lift in net overseas migration has run headlong into a lack of housing supply. While overseas migration would normally have a more direct correlation with rental demand, with vacancy rates holding around 1% in most cities, it’s reasonable to assume more people are fast tracking a purchasing decision simply because they can’t find rental accommodation,” Mr Lawless said.
“Many prospective vendors have stayed on the sidelines through the downturn, keeping inventory at below average levels and providing sellers with some leverage at the negotiation table.”
Mr Lawless said the growing expectation the rate hiking cycle is over, or nearly over, following a sharp decline in values was another likely factor supporting housing demand.
“This could be contributing to a broader perception that the market has bottomed out, and for those attempting to time the market, that it is considered to be a good time to buy,” he said.
“As interest rates stabilise there is a good chance consumer sentiment will improve, bolstering housing market activity from both a purchasing and a selling perspective.”
The AMP’s Dr Oliver said “a surge in demand on the back of high immigration and constrained supply appear to be dominating the negative impact of higher interest rates.”
But he did warn that there’s “the risk of another down leg in prices is high as interest rate hikes continue to impact.”
