Dear Fellow Property Investor,
Big News!
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.
While some housing economists said prices might still have further to fall – if interest rates continued to rise – even those who aren’t yet calling a bottom said the faster-than-expected return of immigration after the pandemic would underpin the housing market.
“Immigration is going to be stronger than developers anticipated some 12 to 24 months prior, and we saw in the 2000s how unexpected immigration can be a fillip to prices,” said Challenger chief economist Jonathan Kearns, a former head of financial stability at the Reserve Bank.
“Other factors were at play then also, and in the pandemic, unexpected lack of immigration was more than offset by declining household size and general demand for more housing.”
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.
“As more data flows have come through across housing finance, consumer sentiment, vendor discounting and sales volumes, it seems the national housing market downswing may have bottomed out in early March,” said CoreLogic head of research Eliza Owen.
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“A record return in overseas migration was unexpected, and it has left housing demand far outstripping supply, which has contributed to the start of a more sustained upswing in value.”
CoreLogic’s daily index also indicates Sydney seems to have bottomed out in the first week of February, and have since increased around 2 per cent, while Melbourne bottomed out early March and has picked up 0.7 per cent.
This means that national home values have dropped by 9.4 per cent peak-to-trough, which is the largest housing market downswing on record, according to CoreLogic. However, this is significantly lower than many economists’ average forecast of a 15 per cent decline.
For Sydney, house prices had dropped by 14 per cent peak-to-trough and Melbourne slumped by 9.8 per cent. These results are lower than many economists’ forecast of 20 per cent price falls for Sydney and a 15 per cent drop in Melbourne.
“The start of an upswing is usually marked by a pick-up in the higher end of the Sydney and Melbourne market, which was also reflected in March home value index data,” Ms Owen said.
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.
Sales volumes also recovered strongly, jumping by 10.4 per cent month-on-month through March, although still down year-on-year by about 16 per cent according to CoreLogic.
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Yours in Success,
KONRAD BOBILAK