Sydney’s housing market is on track to recoup the 15 per cent loss in prices suffered during the 18-month downturn early next year and reach a new record high by March.
Property prices in the harbour city surged 2.7 per cent in November, the highest monthly growth rate since 1988, while Melbourne property values grew by 2.2 per cent over the same period, according to the latest CoreLogic Home Value Index.
Prices also increased in every other capital city except Darwin, with a 2.3 per cent rise in Hobart, 1.6 per cent in Canberra, 0.8 per cent in Brisbane and 0.5 per cent in Adelaide.
Even in Perth, where property prices have been trending lower since mid-2014, values grew slightly by 0.4 percent. Over the past 13 years, Perth has gone from having the most expensive property of all the capital cities to the cheapest.
CoreLogic’s head of research Tim Lawless said since Sydney’s market had bottomed out in May, prices were up 8.2 percent and just 8 per cent lower than when prices peak in July 2017.”If we see this trajectory of growth continuing Sydney, based on the run rate of growth over the past three months, we will find a new record high in March next year,” Mr Lawless said.
“I think for the next few months, I can’t really see any changes that would start to slow the market down,” Mr Lawless said.
“There is this urgency that we’re seeing in the market. Just speaking to a lot of real estate groups and also consumers it does seem to be that FOMO is really come back into the marketplace with a large number of property buyers competing for a very small pool of stock.”
Melbourne is on track to hit a new record high of prices in January, with property values just 3.7 percent below their peak reached in October 2017.
He said the real test would come early next year when a ramp-up in new listing numbers was expected due to the strong selling conditions.
“We’re still seeing new listings and total listing numbers well below where they were a year ago in every capital city. But I think the fact that selling conditions are so strong, which is evidenced by the very high clearance rates, by reduced selling times and by very low discounting rates, I think we will start to see more homeowners putting their properties on the market. So higher listing numbers could dampen some of this,” Mr Lawless said.
Economist Stephen Koukoulas said while a property rebound would not faze the Reserve Bank he said the speed of the pick-up, at more than 2 percent a month, would likely cause some concern and, along with a possible upside of a wealth effect, could give the RBA a reason not to cut interest rates.
“Obviously we need to wait and see the data for the next few months but nonetheless, I think it will feed into the RBA’s thinking from a couple of perspectives. One, as we know, the RBA has got a very strong thought process around household debt and house prices… and on the positive side there is a wealth effect and its impact on consumption,” Mr Koukoulas said.
“One of the reasons why I think consumption has been weak up until the September quarter roughly, was that prices were falling through til the middle of the year so there was a lag effect from wealth being eroded. If this continues through the middle of next year, then there will be a positive wealth effect on consumers and when consumers are wealthier, they tend to increase the speed at which they spend, so it’s not all concerning for the RBA.”