This article is from the Australian Property Journal archive
Australia’s housing market downturn may have lasted all of three months, with prices rebounding in February as sentiment improved amid anticipation of a long-awaited interest rate cut and a slowdown in new listings.
Melbourne broke a run of 10 months of price softening, leading the capital cities for growth alongside Hobart with a 0.4% increase. They helped the latest CoreLogic national home index to a 0.3% rise.
CoreLogic’s research director, Tim Lawless told Australian Property Journal it was his belief that the change in momentum was a function of anticipation of the RBA’s interest rate cut, rather than the decision.
“I would have thought it would take longer for the rate cut itself to be flowing through and transmit to a lift in borrowing capacity and improved ability to buy,” he said.
“Absolutely, I think this is more about the sentiment boost that is delivered to the market.”
He noted the granular ANZ weekly index had shown bounce in sentiment after the rate cut.
“I expect the monthly data will show that when we see it for March.
“There’s a really close relationship between consumer sentiment and transactional activity in the housing market and I think we’re probably starting to see that now – with a lag because sentiment has been rising for some time – albeit from really low levels and it’s still in pessimistic territory.
“Even though the cut looks like it may be enough to keep a floor under price falls and maybe restore some level of growth to the market, we’re certainly not expecting 2025 to be a strong growth year for housing values, at least at a macro level.”
Lawless said there’s “a lot of opposing forces”.
“There’s things like affordability which are still quite challenging in a lot of markets.
“Borrowing capacity is still quite restrictive even though we’ve seen the rate cut. It will take a long time for rates to get back to the pre-pandemic 10-year average – probably a couple of years.”
The mid-sized capitals of Brisbane, Perth and Adelaide lost their mantle as the strongest growth markets, with modest increases of 0.2% to 0.3%. Adelaide and Brisbane are still leading rolling quarterly growth trends, up 1.2% and 0.9% respectively, but a sharp slowdown in Perth’s value growth has dragged its quarterly change to just 0.3%.
Sydney lifted 0.3% in the month.
The return to growth across Sydney and Melbourne was driven by the more expensive end of the market.
“We did see a lift in lower quartile values as well, but it was mostly the upper quartile where values were showing a turnaround – and that’s also the end of the market that’s shown more weakness as well,” Lawless told Australian Property Journal.
“We’ve looked at previous rate cutting cycles and it does tend to be the more affluent end of the market – particularly premium house markets rather than unit markets – which tend to be a lot more reactive to rate cuts historically and that seems to be what we’re seeing now.”
“In Melbourne, we saw the downturn starting around most of the affluent markets around the inner east, the bayside, the Mornington Peninsula.
“Potentially with borrowing capacity lifting a little bit and buyers maybe seeking out a bargain compared to where the market peaked at back in 2022, it makes sense that that’s the section of the market they’d be targeting.”
A modest rebound may also be supported by a slowdown in the flow of freshly advertised listings. Counts of new listings coming to market across the combined capitals were tracking 4.7% lower than a year ago over the four weeks to February 23rd, and 1.5% below the previous five-year average.
“It does look like selling conditions might improve and maybe that’s going to be some incentive for people looking to offload their home to get into the marketplace, but I think until we see actual total supply levels coming down, total listing numbers coming down, you’ll probably still see some reluctance on vendors to sell,” Lawless said.
Regional values continued to show a stronger growth trend relative to the capitals. They rose 0.4% over the month and 1.0% over the rolling quarter, compared to the 0.3% monthly rise and 0.4% quarterly fall seen in capital city values. However, the monthly change did favour Sydney, Melbourne and Hobart over their regional counterparts.
