House prices continue to rebound

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AFFORDABILITY concerns have re-emerged as the stunning house price rebound of recent months eased in January.

New data from CoreLogic shows Sydney and Melbourne, which have driven the recent major moves in the market, saw respective growth of 1.1% and 1.2% during the month. During the spring selling season, they had posted 2.7% and 2.2% monthly increases.

Housing values rose in January across every capital city and rest-of-state region, apart from regional South Australia, where values held firm. Hobart recorded higher growth relative to most other regions, at 0.9%, while the remaining capitals generally saw a mild rise.

Nationally, housing values have recovered 6.7% since finding a floor in June, but remain 2.2% below the October 2017 peak. CoreLogic head of research, Tim Lawless said that with housing values rising at the quarterly pace of 3.7%, we are likely to see a nominal recovery in the national home value measure within the next two-to-three months.

Lawless said the CoreLogic seasonally adjusted hedonic index implies the time of year shaves about on basis point of growth from the December reading and two basis points from the January reading.
“Factoring in the seasonal affect, the latest results indicate a reduction in the speed of growth across most markets, especially for Sydney and Melbourne where affordability constraints are once again becoming more pressing.

“As advertised stock levels rise over the early part of the year, we could see some further dampening of growth rates.”

Moody’s Investors Service warned last year the turnaround in the residential market is likely to worsen Australian housing affordability issues. Mortgage interest rate cuts and house price declines had taken down the share of household income mortgage borrowers need to meet repayments on new loans.

Housing market sentiment across the country has hit a near six-year high, according to NAB, and the major lender joined rival ANZ last week in upgrading its early year price forecasts for 2020. NAB has tipped Sydney and Melbourne houses to experience price growth of 7.4%, before halving to 3.7% each in 2021. The forecast was less bullish than ANZ’s, which was revised upwards to 8% from 6% nationally, and scaled up Melbourne from 9% to 12% and Sydney to 10% from 7%.

Four of Australia’s eight capital cities – Brisbane, Adelaide, Hobart and Canberra – are already showing home values at new record highs. Sydney values need to recover a further 5.4% before posting a full recovery and Melbourne values need to see a further 1.2% lift.
Lawless said Perth housing values are slowly emerging from a slump lasting five-and-a-half years, which has taken 21.8% off values. Up 0.1% over the month, Perth values posted their first rise over a rolling quarter (0.4%) since a brief period of growth in May of 2018. Western Australians grew in confidence at a faster rate than anywhere else, according to NAB’s latest residential survey.

In Darwin, where dwelling values have been consistently falling to be almost 32% below their 2014 peak, posted a subtle rise in January.
Across the regional markets, the strongest conditions were recorded in regional Tasmania, up 1.3%, followed by regional Western Australia (0.9%) and regional Victoria and regional Queensland (both up 0.8%).

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