Sydney and Melbourne house prices rise following federal election in sign of property market improvement
- Auction clearance rates rose strongly last week following the federal election, led by far stronger performances from the Sydney and Melbourne markets.
- According to data from CoreLogic, median home prices in Sydney and Melbourne also increased last week.
- The federal election result, along with likely rate cuts from the RBA and an easing in lending standards from APRA, may have contributed to the recent improvement in conditions in Australia’s largest and most expensive housing markets.
- Further housing-related data in the period ahead will help to determine whether a turning point for the property market is currently underway.
Auction clearance rates rose strongly last week following the federal election, led by far stronger performances from the Sydney and Melbourne markets.
Prices in both major cities also increased, bucking the trend seen for well over a year.
According to CoreLogic, Australia’s preliminary combined capitals clearance rate jumped to 62.6%, a sharp improvement on the 57.0% level recorded seven days earlier.
2,041 homes went under the hammer during the week, more than double the 917 level seen in the lead up to the election.
Of those auctions that took place, CoreLogic received results from 1,534, or 75.2%. That reporting rate was significantly higher than the 69% level seen in the previous week.
967 homes sold before, at or immediately after auction while 567 homes were passed in, including 110 that never made it to auction during the week.
The stronger preliminary clearance rate, coupled with firmer reporting levels from agents, points to the likelihood of a far smaller downward revision to CoreLogic’s final clearance level that will be released on Thursday.
In the previous week, the preliminary estimate was revised down to show a final clearance level of 55.2%, leaving it at the highest level since September 2018.
“It’s possible that this week’s final clearance rate may top that as remaining results roll in,” CoreLogic said in a note released on Sunday.
“Over the same week last year the final clearance rate was recorded at 56.2%.”
So not only is the final clearance rate for last week likely to exceed that released seven days earlier, it may surpass the level seen in the same week a year ago, continuing the modest firming in clearance levels seen since late last year.
By individual capitals, Sydney, at 69.9%, registered the strongest preliminary clearance rate across the country, lifting from the initial estimate of 60.7% recorded seven days earlier.
697 homes went under the hammer in Australia’s largest and most expensive housing market during the week, near-triple the 270 level seen seven days earlier.
CoreLogic received results from 72.4% of the auctions that took place, a substantial improvement on the 62.2% level seen in the previous week.
Given the improvement in reporting levels and starting point for the preliminary estimate, Sydney’s final clearance rate is likely to be revised down to the low 60% region, a result far stronger than the 56.1% level seen in the same week a year ago.
Like Sydney, Melbourne also recorded a preliminary clearance level in excess of 60%, remaining steady at 62.9% despite a doubling in market activity.
Reporting rates in the city were stronger than the week previous, lifting to 81.2% from 77.0%. That suggests its final clearance level may too exceed the 59.0% level seen in the same corresponding week in 2018.
Across the smaller capitals, preliminary clearance levels improved sharply in Adelaide, Canberra and Perth but weakened marginally in Brisbane.
Mirroring the improvement in auction clearance rates in both Sydney and Melbourne in recent months, for the first time in a long time, median home prices in both cities increased last week.
According to CoreLogic’s daily hedonic home value series, Sydney’s median price rose 0.3% from a week earlier, with a smaller 0.1% gain seen in Melbourne.
Prices in both cities have been trending lower for well over a year, including declines of over 4.2% since the end of 2018.
Across the other smaller mainland state capitals, median prices rose by less than 0.1% in Adelaide last week but fell 0.1% and 0.5% respectively in Brisbane and Perth.
The improvement in market conditions in both Sydney and Melbourne is noteworthy, coming not only after the surprise Coalition victory in the federal election but also in the same week the Reserve Bank of Australia (RBA) and Australia’s banking regulator, APRA, flagged the likelihood of official interest rate cuts and an easing in mortgage lending standards in the months ahead.
While one week’s data is not enough to definitely say that we’ve reached a turning point for the housing market, the near-term indicators suggest that such an outcome is firming.
“Demand has clearly seen an initial boost from the clearer prospect of interest rate cuts and the removal of uncertainty around housing related tax policy following the Coalition’s re-election. Prospective changes to loan serviceability assessments have likely given support as well,” said Matthew Hassan, Senior Economist at Westpac Bank, following the latest CoreLogic data.
“The extent to which this generates a recovery in housing markets remains unclear. While the initial response is positive, it remains to be seen how ‘follow through’ the move has.”
Late last week, both Citi and AMP Capital revised down their forecasts for how much Australian property prices were likely to fall this year. Citi went one step further, forecasting that prices will begin to increase towards the latter parts of next year.