(Realestate) – Prices are starting to rise in the priciest neighbourhoods in the country and clearance rates are up, but what does this mean for the market as a whole?
The market is recovering in high-end neighbourhoods.
All signs point to a recovery, but it will be slow going
A recent optimistic prediction that house prices would rise by 10% soon in Melbourne and Sydney is still very far from a reality.
Prices continue to fall, year on year, across all major regions in Australia, with the exception of Hobart, according to the most recent realestate.com.au home price index data.Why Spring 2019 is a good time to sell
There is no doubt conditions are very different to last year – search activity on realestate.com.au has jumped 25%, interest rates are at record lows, access to finance is very slowly easing and income tax cuts have given people a little bit more money to spend.
At the moment, we can see that premium suburbs in Melbourne and Sydney are seeing the highest views per listing – this has flowed through to very high clearance rates.
For now, it is a premium market recovery story, typical of early in a price cycle.
If nothing derails the recovery (eg rising unemployment) then we should be set for the ripple effect to other suburbs that tends to be the next stage of the recovery.Property Outlook: July 2019
While July was very low for listings, it looks like it is recovering.
A 10% price increase across Sydney and Melbourne seems highly unlikely for a number of reasons, although many premium suburbs will likely achieve this over the next 12 months.
The first is that investors will take a long time to come back to the same levels they were at in the peak.
Offshore buyers are also far less active than they were before.
Access to finance is easing but responsible lending may even get tougher.
We have also had record levels of building which will keep stock levels elevated for a little while, although the very low building approval numbers will start to become a problem in two to three years.
We also have much shakier economic conditions, which may impact buyer confidence.
Interest rates – cut or hold?
Globally, the trade war is taking its toll and there is nothing Australian interest rate changes can do to fix this problem.
A marked slow down in global growth will hit Australian growth.
At this stage, many indicators show a slow economy but not yet a drastically shrinking one.Interest Rates
The unemployment rate remained flat in July, inflation lifted slightly on the back of higher fuel costs and economic growth remains sluggish.
The biggest challenge right now is China’s slowing growth.
The Reserve Bank of Australia (RBA) noted in June that for every five basis point slow down in economic growth in China would lead to Australia’s growth pulling back by one basis point.
While this is based on modelling, it may not impact all sectors as expected. For example, Australian iron ore exports should reduce from a slowing China however we have recently seen that China is now importing the highest proportion of their total iron ore imports from Australia ever recorded.
The trade war also seems to have some early positive impacts on exports of Australian agriculture – tariffs on US agriculture is making Australian agriculture more competitive.
A hold is likely this week as the RBA holds its ammunition to see if conditions continue to deteriorate.
We are still a long way from heading into recession, however conditions can change quickly, particularly with all the negativity overseas.
Where are the top growth sub-regions?
There are nine sub-regions in Australia that are seeing price growth on a 12 month basis.
Launceston continues to be the strongest market, followed by Mackay, Hobart and mid north coast.
Queensland features strongly in the list, likely driven by continued good news on mining.
It accounts for four of the nine growth areas.How growth in property prices affects you
Clearance rates remain high
Last day of winter showed auction numbers slowly creeping up but still well down on the same time last year.
Clearance rates hit 76% in Melbourne and 80% in Sydney.