The Australian housing market is on the rebound: ANZ
The turn in the housing market has been remarkable, with the rebound in prices considerably stronger than expected, the latest ANZ Australian Housing Update has stated.
They found auction clearance rates bottomed in December and have been rising since. But the improvement became much more marked from May onwards, while the change in sentiment was driven by the combination of lower rates, easier access to credit, and increased certainty around housing taxation.
The recovery in prices has been driven by Sydney and Melbourne.
Prices in the two cities stabilised in June after a period of decline, leaving them down 15% and 11%, respectively, from their peaks.
Prices are up 3% in both cities in the past three months, and ongoing buoyant auction clearance rates point to more gains.
In Brisbane and Adelaide prices appear to be stabilising after a period of modest weakness (-3% and -1% from the respective peaks).
Perth prices are falling, bringing the cumulative decline to 21% since the top in 2014.
Hobart prices now look to be stabilising after big jump since early 2016 where prices have risen a cumulative 34%.
The report said, "easier credit is helping to drive the quick rebound."
"We had thought that the easing of the mortgage serviceability floor would be at least partly offset by other tightening measures such as the updated Household Expenditure Measure (HEM) and the introduction of comprehensive credit reporting. But that has not been the case. We do, though, see credit conditions remaining tighter than they were pre-Royal Commission."
"Nationwide, we expect prices to continue to rise strongly through Q4, driven by Sydney and Melbourne, after which we expect gains to moderate.
"We have annual price growth for Sydney and Melbourne peaking in mid2020 in the low double digits.
"Through 2020 we look for growth of 6% nationwide with a further gain of 4% through 2021. The risks seem tilted to the upside, alongside the risks for further monetary easing," they added.
The high volume of recent completions has not been replaced by new approvals and work yet to be done is falling sharply.
Building approvals have dropped sharply, driven by a renewed decline in major apartment building approvals.
Property developers are increasingly confident about access to credit, they found, while reduced rates and APRA easing have increased demand.
While strong population growth, low unemployment and relatively low vacancy rates will support the recovery of construction activity, quality concerns may delay the timing.
ANZ forecast activity to trough in mid-2020 before picking up modestly.
Declines in house prices over the past few years have improved a range of affordability measures.
ANZ Economists said, "the recent sharp turnaround in prices, however, will ultimately reduce affordability, in Sydney and Melbourne in particular."
"Housing loan arrears rates have risen, mostly in WA. Excluding WA, arrears rates in Australia are below 1% and have decreased slightly in recent months."
"Australia’s arrears rate remains low by international standards."
"While mortgage repayments generally are affordable given low interest rates, high household debt leaves householders vulnerable."
"A negative shock driving unemployment higher would be amplified by the high level of debt," they concluded.
