The Australian national housing market is bouncing back from a period of negative growth, due to lower interest rates and relaxation of lending criteria. Let’s take a look at the main capital city housing markets and provide our view of where they are headed in the next 12 months. With population growth remaining solid, macro-economic indicators stabilising and the addition of other stimulus the downturn in housing should be more shallow in comparison to previous cycles.
According to the HIA latest spring report dwelling commencements are tipped to continually fall from a peak of 121,678 in 2017/2018 to just 102,126 in 2019/2020, before a small contraction in 2020/2021 to 101,087.
Interest rate cuts and the gradual restoration of confidence in the housing market has lifted the median price for Sydney back to the level recorded at the end of 2018, while Melbourne’s median is already 1.0 per cent higher than in December last year. The national median dwelling price increased by 1.0 per cent in October 2019, marking the fourth consecutive monthly improvement. The successive improvements provide for an increase of 2.4 per cent over the October ‘quarter’ but it is still 2.3 per cent below the level recorded this time a year ago.
The median dwelling price in Sydney also posted steady improvements since the cyclical low in May this year 2019. These improvements have lifted the price by 3.3 per cent from the cyclical low but it is still 2.6 per cent down from the level recorded in October a year ago. With one month of the year to go, it looks likely that the Sydney market will record modest annual growth.
It is a similar story for the Melbourne market, where five consecutive monthly improvements have lifted the median dwelling price by 6.0 per cent since the low point in May. At the end of October, Melbourne’s median dwelling price was just 1.0 per cent below the level a year ago. Despite fears of oversupply in the apartment market, activity in this segment has been fairly robust. Transaction volumes in the apartment market are up compared to a year ago and the median apartment price in October 2019 was up by 2.6 per cent on the level a year ago.
The Brisbane market wasn’t locked into the east coast home price roller coaster in the last cycle. Dwelling prices softened a little during late 2018 and early 2019, and have now begun to reverse the downturn. The median price dwelling in Brisbane increased by around 1.1 per cent over the three months to October, and only around 1.5 per cent below the peak recorded a year ago.
The last five years have been pretty woeful for Perth’s housing market. This period of decline has taken the median home price back to the level last seen in early 2006, essentially reversing all of the gains recorded during the mining boom. The post mining boom correction should be nearing completion.
In fact, the cyclical correction is probably now into a phase where the downturn has overshot fair housing value. The Western Australian economy is now on a more solid footing, the rate of population growth is continuing to increase, rental vacancy is dropping, some metrics show that rental prices are increasing and there is very little new housing stock being added. When you combine these factors with the low interest rate environment, it is hard to see Perth prices remaining this low for too much longer.
Adelaide’s median price reached an all-time high in the latter months of 2018. Like everywhere else, the fear and uncertainty in the lead up to the federal election kept any jubilation in check. Since reaching the peak in October 2018, the median price eased and was 0.9 per cent below the peak at the end of October this year. On a positive note, preliminary estimates show that the volume of property transactions in Adelaide during the three months to October this year are slightly higher than a year earlier.
The median dwelling price in Darwin has fallen by 31 per cent since the 2014 peak, including a 9.2 per cent fall over the twelve months to October this year. Unlike Perth, Darwin’s economy is still in the process of down-sizing following the conclusion of construction of the Inpex LNG project. Latest demographic statistics show the population of the NT is declining which is a response to the reduction in demand for labour. Without a sizable surge in new investment to take up the excess productive capacity that has been freed up in Darwin, this population decline will drag on confidence in the housing market and likely prices with it.
The national median reached a peak in August 2017 and is now 5.8 per cent below the peak (as of October this year), over the same time frame Hobart’s median price has increased by 14.7 per cent. Hobart had a good period of strong price growth during 2017 and 2018 but the pace has slowed considerably in 2019. The median price in Hobart was up by 0.5 per cent in October and is up by 2.5 per cent compared to this time a year ago.
Despite the wild fluctuations in prices in neighbouring cities to the north and the south, the median price in Canberra has been slowly but steadily moving higher, up by 2.0 per cent over the year to October. This steady growth has seen the median price in the nation’s capital reach a record high.
HIA Australian Outlook Spring Edition 2019, This time a year ago the HIA were amongst the few expecting the property market to begin recovering in 2019 amidst a barrage of dire predictions from pessimists. With the improving credit environment, low interest rates, and confidence in the housing market being restored, we are optimistic that the recovery in prices will continue into 2020.
I for one sure hope it will seeing how closely tied housing is with the overall Australian economy. Let me know your thoughts and predictions on where you think house prices in Australia are going?