Melbourne, Sydney house prices are bouncing back as national market records record jump

The national property market has broken a more than four year record but it’s bad news for average Aussies looking for a home.

Property prices in the two largest cities surged higher again and are edging further out of reach for average Australians.

The correction experienced in the lead up to the May federal election when prices in Sydney and Melbourne had fallen back more than 10 per cent appears to be behind would-be buyers.

The Victorian capital rose 2.3 per cent higher in October and the Harbour City jumped 1.7 per cent, according to CoreLogic data released this morning.

The national home value index was buoyed by these two results to record a fourth straight month of gains, with the 1.2 per cent rise the strongest lift for more than four years.

Corelogic research director Tim Lawless said the rate of recovery in the two biggest markets has caught him by surprise.

“These markets bottomed out in May and since then we’ve seen Melbourne values increase by 6 per cent, Sydney’s up 5.3 per cent,” he told news.com.au.

“Earlier in the year I certainly wouldn’t have expected the market place to be recovering this quickly but it really does highlight how stimulus sensitive the market is.”

Record low interest rates, Australian Prudential Regulation Authority loosening restrictions related to mortgage serviceability and the election result have all caused the market to surge higher, Mr Lawless said.

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“It’s really those three factors and then you have to consider that Sydney and Melbourne are the markets where stimulus is most effective,” he said.

“And no surprise these are the economies that are also the strongest where unemployment is the lowest and jobs growth is the fastest.”

The housing market expert said property prices are “absolutely” becoming more unaffordable.

“You would have to imagine that with wages growth and household income growth being sluggish, we are going to see the reversal in the improvement of housing affordability,” he said

“We will gradually see that showing up in a slowdown in first homebuyer activity despite some of the incentives that are in place.”

AMP chief economist Shane Oliver agreed, saying the rise was bad news for Australians hoping to jump on the property ladder in the two key markets.

“Unaffordability is a major Australian problem,” he told news.com.au.

“It was an issue at the top of the market in 2017 and it was an issue at the bottom earlier this year given the 10 per cent fall from top to bottom still left prices unaffordable for many buyers.”

Melbourne and Sydney rose 5.5 and 5 per cent respectively in the quarter, creating the possibility of a 20 per cent annual leap.

But Mr Lawless doubts these levels of growth can be sustained due to two reasons.

“Housing affordability will be negatively impacted and will restrict participation in the market,” he said.

“And if we do see credit growth starting to gather pace and investment in the market gathering pace, then that is where we might see some intervention from the regulators which would limit credit flows.”

Melbourne houses are surging. Picture: realestate.com.au

The result across the nation was positive for the market with Perth the only capital city to lose ground, ticking 0.4 per cent lower.

Behind the two major cities, Hobart, Brisbane, and Canberra were strongest with rises of between 0.6 and 0.9.

Adelaide and Darwin eked out gains of 0.4 and 0.3 per cent respectively.

MELBOURNE CUP RATE CUT UNLIKELY

The chance of a Melbourne Cup Day rate cut from the Reserve Bank of Australia is next to zero after inflation data inched higher on Wednesday.

Quarterly inflation fell to 0.5 per cent in the three months to September 30 but annual inflation rose to 1.6 per cent.

The slight increase is edging closer to the RBA’s preferred range of between 2 and 3 per cent, with the market now pricing in about a 6 per cent chance of a cut next week.

“Inflation is still low for sure,” Westpac currency expert Sean Callow told news.com.au.

“But given that the RBA is so focused on the unemployment rate as its key indicator and getting that lower.

“And given how patient the RBA seems to be about inflation getting back on target, then it would have had to have been super low inflation to really get the market excited (about another cut).”

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