Does RBA cash rate confirm this is the sweet spot for home prices?

Prices are inching up, listing volumes have dropped and to top it off the RBA says it won’t change rates for three years.

If there is going to be a sweet spot in the house price recovery this is it.

Prices are inching up across the country. Crucially, listing volumes have dropped and to top it off, the RBA is still saying it won’t change rates for three years.

Of course, as Commonwealth Bank economist Gareth Aird points out, at a certain point, the central bank will have to stop talking of “three years” for the simple reason time is passing since it first made this commitment a few months ago.

We won’t be hearing from the RBA on rates again until it meets again in February next year.

But another few months of this buoyant market and that promise of freezing rates for 36 months will need to be comprehensively reviewed.

In the meantime, a surprise house price upswing - greatly energised by government incentives - continues.

It might be riddled with exceptions - falling rental yields, unit price declines and wide regional variations - but the numbers speak for themselves.

Overall, dwelling prices rose in every city and region during November, even in Melbourne.

According to the CoreLogic research group, the average combined lift was 0.8 per cent. In turn, that means prices are now up by 1.1 per cent over the quarter, which is enough to confirm the national market is out of the woods.

CBA, the nation’s largest home lender, which had recently forecast significant house price falls is now suggesting: “We see a solid pick up in dwelling prices in the pipeline.”

Among the range of government incentives aimed at supporting the housing market, the HomeBuilder grant appears to have been the standout.

Consider this: unemployment is at 7 per cent; immigration - the key factor in new home activity - is at its lowest level since World War 2, yet new home approvals just had their best month in 21 years.

No wonder Shane Garrett, the chief economist at the Master Builders Association, says HomeBuilder - recently extended until the end of 2021 - is a “huge success”.

Though the unprecedented level of government stimulus might have been expected to support the market, one concern earlier in the year was that a flood of housing stock would appear after the lockdowns ended in the major cities.

A torrent of housing stock for sale could have tipped the balance.

However, Louis Christopher, CEO at SQM Research, notes there has been an “abnormal” drop in national residential property listing month on month.

The 4 per cent drop between October and November is unusual because listings generally accelerate in the spring season.

Christopher suggests: “That drop was mostly driven by a decline in old listings - this is a very good sign, it means that even houses on the market for a long period are now selling.”

The outstanding weak spot in the market, nationally, remains unit prices, which have not followed houses higher due to oversupply in metropolitan centres.

According to SQM data: “Compared to a year ago, the capital city asking prices posted an increase of 4.2 per cent for houses but declined 1.2 per cent for units.”

As units are generally cheaper - average asking prices of $565,800 against $988,500 for houses - they are a common entry point for investors who have been absent from the market this year as owner occupiers dominate.

Falling rental yields have also kept investors away, but this might not last much longer.

Researchers at CoreLogic suggest investors might first appear in regional centres and “the smaller capitals” before returning to the traditional hunting ground of Sydney and Melbourne.