House prices in more than half of Sydney suburbs climbed by more than 1 per cent in the past month, in what has “truly been a tipping point for momentum in the market”.
The housing price downturn is over for Sydney and Melbourne, according to the key property data analysts, who have called the bottom of the market, saying the record return of migrants would bolster prices.
CoreLogic, SQM Research, Proptrack and RBC Capital Markets have all declared house prices had bottomed out in the two biggest housing markets amid a growing number of housing indicators showing a marked upturn. In March, Sydney’s premium eastern suburbs jumped by 3.1 per cent, and in Melbourne, monthly home values rose fastest in the expensive inner east, lifting by 1.3 per cent. The tiered hedonic index also shows a strong recovery trend in the top 25 per cent of home values across the capital cities according to CoreLogic.
“The Washington DC-based agency said it was unlikely that an ongoing fall in house prices would cause a financial crisis, but warned further declines could weigh on the economic outlook. RBC Capital Markets chief economist Su-Lin Ong and macro rates strategist Robert Thompson wrote that recent strong showing in Sydney and Melbourne and moderating declines in other capital cities in March pointed to the market bottoming out in the current quarter.“Nationwide house prices in Australia appear likely to trough in the second quarter of 2023, around one quarter earlier than we had expected,” they wrote.
“Thirdly, the supply of housing will moderate despite some residual pipeline construction activity. Lending for the construction of dwellings has been declining since July last year, while building approvals have fallen consistently since September. This suggests a further easing in residential construction with an emerging shortfall in the period ahead.
“We’ve still got inflation out there and housing historically has been a good hedge against inflation.“We’ve also got record population growth, so we’re seeing a surge in underlying demand for accommodation, and it’s showing up clearly in the rental market. But that also feeds through into the sales market as well because many new arrivals don’t want to rent. That’s why we’re increasingly confident of housing market recovery in 2023.
“Migration has gone from zero to 400,000 per annum. These people need to live somewhere, so demand has increased. Rents and rental yields are rising, which could attract more investors into the market and add to demand.But maybe more rate rises to comeDomain’s chief of research and economics Nicola Powell said the market dynamics had changed, but she was still reluctant to call the bottom of the cycle.
“The path for interest rates remain uncertain, and wealth effects from a housing market recovery could throw a spanner in the works for the RBA if recovering housing values lead to greater levels of household spending,” she said. Canberra has 10 suburbs recording at least 1 per cent house price growth, three in Darwin and one in Hobart. Nationwide, 27 per cent or 955 out of 3271 notched up at least 1 per cent house price increase.
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