‘V-shaped’ housing recovery tipped after RBA comments

Australia’s housing market could be on the road to a “V-shaped” recovery, according with property researchers.

RBC Capital Markets expects national house prices to grow at 6-8 per cent annualised.

Australia’s housing market could be on the road to a “V-shaped” recovery, according with property researchers who have predicted a sharper than an expected recovery in home prices after the Reserve Bank indicated it was not concerned about the rises when setting interest rates.

Reserve Bank governor Philip Lowe said house prices had risen for a few months in a row but argued that prices had previously fallen for about 18 months in Sydney and Melbourne, declining by about 15 per cent. While they had now risen by a few per cent, Mr Lowe said he was “not particularly concerned about that”. “It seems to be now that it’s quite possible that we could have a period of rising house prices because construction activity is slowing. The population is rising quite quickly as well,” he said.

“From a monetary policy perspective it’s not an issue at the moment,” Mr Lowe said, but admitted to being concerned if there was an acceleration beyond existing lending volumes.

“It would become an issue if credit growth accelerated rapidly, but I see no signs of that at the moment,” he said.

Major developers said that credit was growing at about 4 per cent but there were signs of pent-up demand, with keen buyers camping out to buy lots in a Stockland estate in Sydney last weekend.

Auction clearance rates have also jumped this spring, but football finals will crimp volumes over the next two weekends in Sydney and Melbourne.

CoreLogic head of research Tim Lawless said a V-shaped recovery appeared more likely than before but argued that household debt remained an issue for policymakers.

RBC Capital Markets’ head of Australian and New Zealand Su-Lin Ong is predicting that house prices will swing upwards.

“Following a trough in mid-2019, we now expect national house prices to grow 6-8 per cent annualised,” Ms Ong said, up on previous expectations of 4 per cent in coming quarters.

RBC expects Sydney and Melbourne to record stronger gains, before some moderation to sub-4 per cent growth in the second half of 2020.

“Consistent with history, rate cuts are likely to be the most powerful driver of house price gains in the coming quarters, but the pace of these gains are usually not sustained,” Ms Ong said.

But the next two weekends will be subdued on the auction front.

The Saturday AFL match has caused auction numbers in Melbourne to plummet to just 84 this week, with 42 scheduled to go under the hammer today.

While mildly stronger than last year’s finals week figure of 70, the double-digit volume is a 91.8 per cent decrease from last week.

One of the city’s largest real estate networks, Nelson Alexander, has no auctions scheduled this weekend.

It has been 20 years since chairman Duncan McPherson held an auction on grand final day.

“The town is simply obsessed with the grand final. We even try and have all our open homes very early and over before the afternoon,” Mr McPherson said.

“I couldn’t advise any vendor in good conscience to go to auction on that day unless it is the option of last resort.”

Sydney, on the other hand, is preparing for the second-busiest week of the year. The impending Labor day long weekend and NRL grand final next week have many auction punters trying their luck today. The city set to host 894 auctions this week.

CoreLogic auction commentator Kevin Brogan said higher auction volumes were likely to follow after a quiet weekend in ­Melbourne.