CoreLogic head of research Tim Lawless said, "Our national dwelling value index may have found a floor in July, with dwelling values holding firm over the month following a consistent trend towards smaller month-on-month declines through the first half of the year. Since peaking, the national index is down 8.3%."
"The stabilisation in housing values is becoming more broadly based, with five of the eight capital cities recording a subtle rise in values over the month, while the regional areas of South Australia, Tasmania and Northern Territory also recorded a lift in housing values in July."
According to Mr Lawless, a number of factors are supporting the turnaround in housing conditions, however lower mortgage rates, improved access to credit, a boost in housing market confidence post the federal election and recent tax cuts are likely the primary drivers. Other factors include improvements in housing affordability and a reduction in advertised supply levels. "All of which is creating a stronger selling position for vendors," says Mr Lawless.
The primary drivers for the turnaround in housing market performance were Australia's two largest cities, Sydney and Melbourne, where values have ticked higher over the past two months, taking values 0.3% off their floor in Sydney and 0.4% higher in Melbourne. The 0.2% lift in Brisbane values was the first month-on-month rise since November last year.
Mr Lawless said, "Despite an unprecedented amount of new apartment stock entering the market, Sydney and Melbourne unit values have consistently outperformed the detached housing sector through the downturn, and this trend is continuing into the recovery phase."
Sydney house values remain -0.2% lower over the past three months, while unit values have shown a slight rise (+0.02%). In Melbourne, house values were down -0.3% over the most recent three month period while unit values are 1.1% higher.
The stronger performance across the unit sector may be attributable to ongoing affordability challenges in Sydney and Melbourne which, according to Mr Lawless, could be driving demand towards the medium to high density sector. He said, "Values for higher density dwellings are generally lower, however we may see some dampening of unit values in coming months across those precincts where supply is elevated as the large number of high-rise off-the-plan apartment sales moves into the re-sale market."
Mr Lawless said, "The stronger result across the upper quartile partly reflects the fact that Sydney and Melbourne housing values are more expensive relative to other cities, but also that the middle to upper end of the Sydney and Melbourne housing markets are showing the stronger trajectory in housing values after recording deeper declines during the down phase.
"With borrowing capacities recently increasing as a result of lower mortgage rates, and a reduced serviceability floor, existing owners may increasingly be looking to upgrade into more expensive homes.
"Despite value declines across the board, more expensive housing stock has generally recorded greater declines which may be offering home owners the opportunity to upgrade into a more expensive property despite the recent value declines".
The CoreLogic stratified hedonic index highlights the more expensive quarter of the housing market is leading the recovery trend. Across the combined capital cities, upper quartile housing values were down -0.2% over the three months ending July, while lower quartile values were down a larger -0.8% over the same period.
Nationally, rents were down -0.1% over the month to be only 0.6% higher over the past twelve months. While most regions of the country are recording relatively subdued rental growth, the only cities where rents are lower over the past twelve months are Sydney (-2.4%) and Darwin (-4.0%). The strongest rental conditions are in Hobart, with a 5.5% increase over the past twelve months.
Across the combined capitals index, rents were down 0.1% in July, leg by falls in Sydney, Perth and Canberra.
At the same time, advertised housing stock has been reducing. Across the combined capitals, the number of freshly advertised properties is down 25% relative tot he same time last year and total advertised stock levels are now tracking 5% lower relative to a year ago. The reduction in available stock creates less competition among sellers and increased competition among buyers, adding support to higher prices.
Although the trend towards a recovery in housing values is relatively fresh and centred within the largest cities, Mr Lawless said, "there is no sign of a 'v-shaped' recovery.
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