Sydney and Melbourne house prices increase for first time since 2017

Is the worst of the housing downturn over? Sydney and Melbourne house prices have notched their first monthly gains since 2017.

House prices in Sydney and Melbourne have posted their first monthly gains since 2017 in a sign the country’s worst housing downturn on record could be coming to an end.

Sydney and Melbourne dwelling values recorded a slight rise in June of 0.1 per cent and 0.2 per cent respectively, CoreLogic data released on Monday showed.

It was the first monthly increase in Sydney since the market peaked in July 2017 and in Melbourne since its peak in November 2017. CoreLogic said it was an early sign that lower mortgage rates and improved sentiment were already having a flow-on effect.

“I’m not prepared to say the housing market’s going to come roaring back,” said CoreLogic head of research Cameron Kusher.

“But it’s been looking like (the worst is over) really through this year, we’ve been seeing consistently the rate of decline, particularly in Sydney and Melbourne, has been slowing and now we’ve seen positive results for the first time in quite a number of years.”

Mr Kusher cautioned there could still be more falls to come. “Our forecast is for the market to bottom later this year,” he said.

“We don’t want to read too much into one month of data, but certainly we think the market will find a bottom over the next six months but then it’s going to be a pretty slow recovery.”

Nationally house prices fell 0.2 per cent in June, with conditions still weak in other parts of the country. Brisbane was down 0.6 per cent, Adelaide 0.5 per cent, Perth 0.7 per cent, Darwin 0.9 per cent and Canberra 0.9 per cent, while Hobart was up 0.2 per cent.

On a quarterly basis dwelling values in every capital city recorded falls. On an annual basis Sydney and Melbourne were down 9.9 per cent and 9.2 per cent, while nationally prices were down 8 per cent.

Mr Kusher said “what’s probably most interesting” was the falls had continued to be “reasonably large” in other cities.

“Sydney and Melbourne seem to be responding best to the May election, interest rate cuts and flagged serviceability changes,” he said.

“I think it’s that they still have low unemployment, good job growth, good economies, whereas you don’t really have that in the other capitals.”

The most expensive end of the market, which has experienced the biggest falls, now appears to be leading the recovery. Since peaking, Sydney’s top quartile values have fallen 17.1 per cent and Melbourne’s 15.8 per cent.

That trend reversed over the June quarter, with Sydney’s top quartile down 1 per cent compared with a much larger drop of 1.7 per cent in the bottom quartile. Similarly in Melbourne, the top and bottom fell 0.1 per cent and 0.6 per cent respectively.

“It tells you there’s a level of confidence that’s come back into the market,” Mr Kusher said, noting there could soon be a flood of upgraders.

“With those serviceability changes being flagged, I think people are realising that because those higher-priced properties have fallen the most, even though your own property may now be worth less, it may be a decent opportunity to move into a more expensive property.”

Further interest rate cuts are also likely to support the house price recovery.

The Reserve Bank cut the official cash rate to a fresh record low of 1.25 per cent last month in a bid to kickstart the flagging economy and a further cut to 1 per cent is tipped when the Board meets tomorrow.

“It’s certainly something we expect is likely to happen, if not tomorrow over the next couple of months, and it will overall be positive for the market,” Mr Kusher said, adding that it depends on how much of the cut is passed on by the banks.

Mr Kusher noted there were also headwinds that could weigh on the market, including the rollout of comprehensive credit reporting this month that will force banks to crack down on customers with multiple undeclared loans.

“Lenders now have no excuses to write bad loans,” he said.

[e-mail]