Professionals Modbury Australia’s housing value rebound continued into 2020, with price increases spreading beyond the surging Sydney and Melbourne markets.
CoreLogic’s monthly house price index showed the pace of growth slowed nationally to 0.9% in January, but the annual growth rate was 4.1%, the fastest pace of growth in three years.
Melbourne led the house price increase with values up by 1.2%, followed by Sydney where prices rose by 1.1%.
All other capital cities led gains, with Hobart up by 0.9%, followed by Brisbane (0.5%), Canberra (0.3%), Adelaide (0.2%) and more modest 0.1% gains for Perth and Darwin.
CoreLogic’s Head of Research Tim Lawless said despite the increase, there were some signs of a slowdown.
“Seasonal effects provide some explanation for the slowdown,” Mr Lawless said.
“Factoring in the seasonal effect, the latest results indicate a reduction in the speed of growth across most markets, especially for Sydney and Melbourne where affordability constraints are once again becoming more pressing. As advertised stock levels rise over the early part of the year, we could see some further dampening of growth rates.
“There is evidence to suggest that housing value growth rates are tapering in Sydney and Melbourne, although with values rising at more than 1% month-on-month, this pace is still unsustainable considering household income growth is sluggish and housing affordability challenges are worsening.”
The strongest gains were recorded across properties at the upper end of the market, particularly in Sydney and Melbourne, and to a lesser extent, Brisbane.
Sydney’s top quartile market has recorded a 10% lift in house prices over the last twelve months, compared with a 3.4% rise across the lower end of the market. Melbourne’s top quartile is up 11.5% in value over the past year, compared with a 5.6% rise at the lower end of the property market.
The stronger performance across the more expensive end of the Australian property market comes after a larger correction during the downturn, but may also reflect a rise in borrowing capacity following the changes from APRA last year, as well as a rise in owner occupier buyers.
Nationally, rents were up as well, taking the annual change in rental rates to 1.3%, likely due to the tightening in rental supply.
Mr Lawless expects house prices to cool off later in the year as an increasing number of property owners take advantage of a rising market to sell.
“Interest rates are expected to see further reductions, which, along with consistently strong population growth, is likely to continue to support housing demand,” Mr Lawless said.
“A big test for the market will be advertised supply levels. As the market moves out of the festive season slow down, we are expecting more home owners to take advantage of the strong selling conditions and recovery in housing prices.
“Advertised listing numbers remained below average through most of 2019. We’re expecting the number of homes available for sale to also rise in 2020, which may result in a wider range of choice. The knock-on effect could dampen the sense of urgency to purchase housing, and could mitigate more rapid growth.”
NAB’s expectation for house price growth is that it will slow in 2020 and 2021 in Sydney and Melbourne, according to their Residential Property Survey Q4-2019.
“Outcomes for the other capitals are likely to be more mixed, driven by state specific factors,” NAB chief economist Alan Oster said.
“Overall, we expect nationwide dwelling prices to rise by around 4% in 2020 before growth slows to around 2.5% in 2021. Low interest rates are expected to continue to provide support, as is the low level of unemployment and still healthy population growth in Sydney and Melbourne, however affordability constraints will arise as prices reach their previous peak.”
Original article savings.com.au