While much has been made of Australia’s $7 trillion housing market bottoming out in 2019, strong auction results, improving access to finance and interest rate cuts has prompted forecasts that the trough may be brought forward.
Despite the winter real estate listing blues, the trend of strong auction results is a positive sign that buyer confidence has returned to the market.
Corelogic’s first auction clearance rate results since the Reserve Bank slashed interest rates to record lows were published over the weekend, with Sydney surging to 78.2 per cent — up from 50.1 per cent the same time last year.
While low volumes remain a point of concern, clearance rates maintained upward momentum: 945 capital city auctions returned a 68.9 per cent clearance rate, the fourth consecutive week above 60 per cent. Melbourne recorded a 70.3 per cent clearance rate across 388 auctions this week.
The pick up in clearance rates, along with cash rate cuts and the loosening of home lending rules should help support house prices, Domain economist Trent Wiltshire said.
Wiltshire predicts house prices will bottom out in spring.
“Over the six months to December 2019, house and unit prices are forecast to grow by 1 per cent,” Wiltshire said.
“In 2020, we predict house prices to grow by 2 to 4 per cent and unit prices to grow by about 1 to 3 per cent.”
Ratings agency Moody’s has also improved its residential market outlook, with economist Katrina Ell predicting a third quarter market trough.
“Expectations of further lending reductions flowing on from RBA cash rate reductions will also breathe life into the property market and add weight to our view that the national housing market will reach a trough in the third quarter of 2019 and gradually improve thereafter,” Ell said.
The relaxing of the key lending rule, confirmed by APRA last week, will boost borrowers capacity by up to 14 per cent by some estimations.
Lenders will now have the freedom to set their own serviceability buffers, so long as they apply a 2.5 per cent minimum.
While the actions of APRA and cash rate cuts will go someway to offsetting the house price crunch, AMP economist Shane Oliver points out it is unlikely to set off another housing market boom.
“The cut should also help the housing market find its bottom, however it’s unlikely to set off another [boom] due to household debt being substantially higher than in the past, tighter bank lending standards and the chance of rising unemployment.”