Sydney and Melbourne housing market conditions continued to improve in June, despite dwelling values still trending lower nationally, according to CoreLogic’s June 2019 Home Property Value Index.
Interest rate cuts and renewed confidence in the property market are having a flow-on effect for conditions across the country. CoreLogic recorded a 0.2 per cent fall in national dwelling values, the smallest month-on-month decline since March 2018.
Sydney saw an uptrend in dwelling values of 0.1 per cent, marking the first monthly increase in the city since July 2017. In addition, Melbourne recorded a rise of 0.2 per cent, the first move since November 2017.
Hobart was the only other capital city to record an increase (0.2 per cent) in dwelling values. Despite strong growth over the past few years, Hobart experienced a 1.1 per cent fall over the three months leading up to June.
Outside of Hobart, regional Tasmania proved strong, increasing by 1.3 per cent for the quarter. This is contrary to the general trend among other regional areas where dwelling values are losing momentum.
Darwin experienced the biggest decline in housing values, falling by 0.9 per cent over June and 3.6 per cent over the quarter.
Perth also continued its weaker trend, with a monthly decline of 0.7 per cent in June and 2.1 per cent over the quarter.
Adelaide fell by 0.5 in June and 0.4 per cent over the quarter, marking the smallest decline amongst the capital cities. Brisbane slipped by 0.6 per cent and Canberra by 0.9 per cent.
National residential property listings fell by 5.8 per cent in June while year-on-year listings declined by 1.8 per cent, according SQM Research.
Listing numbers in Sydney experienced the highest decline, falling by 10.8 per cent over the month and 9.8 per cent from the same time last year. Melbourne wasn’t far behind, recording a 10.7 per cent decline over June.
Other declines included Hobart (9.4 per cent), Canberra (9 per cent), Adelaide (5.2 per cent), Perth (5.1 per cent) and Brisbane (4.4 per cent). Darwin recorded the lowest fall in listings at 1.3 per cent.
Seasonally, it’s not unusual for listing numbers to fall throughout winter. With colder weather and falling housing prices, many vendors are waiting longer to sell. The Reserve Bank of Australia’s additional rate cuts could see an upward trend in listings throughout July.
Vacancy and rental rates
National rental rates remained relatively unchanged in June, tracking 0.3 per cent higher for the quarter and 0.4 per cent higher for the financial year. Despite sluggish conditions capital cities are starting to see rental rates rise faster, while those experiencing weakening are seeing the pace of decline ease.
Hobart continued to lead the charge for rental rate growth after recording a 4.7 per cent monthly increase. With Hobart’s rental rates outperforming dwelling values, gross rental yields are continuing to push higher.
Darwin was on the other end of the property spectrum, tracking the largest yearly fall of 4.7 per cent.
Gross rental yields across both combined capital cities and combined regional areas rose from record lows, signalling that the property downturn may be over.
Auction clearance rates
National auction clearance rates got off to a slow start in June with the Queen’s birthday long weekend returning an average preliminary auction clearance rate of 51.3 per cent.
However, the housing market surged back to life mid-month with CoreLogic recording a preliminary national clearance rate of 66.4 per cent from almost 1,500 auctions.
The winter auction market continued to warm as more than 60 per cent of listed properties were sold under the hammer nationally for three consecutive weeks.
According to CoreLogic, both the Sydney and Melbourne markets consistently recorded preliminary rates of above 60 per cent. This is a substantial improvement relative to late 2018 where rates were holding in the low 40 per cent range.
While Sydney and Melbourne auction clearance rates have kept up their post-election energy, low auction volumes are likely to weaken the market pulse if house prices remain flat.
Finance and interest rates
The Reserve Bank of Australia (RBA) has cut interest rates for the second time in two months, reducing the official cash rate to a record low of just 1 per cent.
The unprecedented move to further reduce rates follows on from the RBA’s decision to drop rates to1.25 per cent at the beginning of June.
In an attempt to kick-start the economy and drive unemployment lower, the 25-basis points reduction marks the first time the RBA has delivered
back-to-back cuts since 2012.
In the statement accompanying the decision, RBA governor Philip Lowe indicated rates could be pushed even lower if the jobless rate didn’t fall fast enough. This mirrors several predictions that the official rate will fall as low as 0.75 per cent by the end of 2019.
Treasurer Josh Frydenberg said the government expects the banks to pass on the full rate cut to borrowers.
Along with interest rate cuts, CoreLogic said housing finance data and credit aggregates have caused a slowdown in investment lending. Investor credit has increased at an historically slow rate of 0.6 per cent.