Home prices on a fast track to recovery

Sydney house prices are rising at their fastest pace in more than 30 years.

Stephanie and David Devenish at their new home in the Perth suburb of Cottesloe. Picture: Colin Murty

Sydney house prices are rising at their fastest pace in more than 30 years as evidence mounts the Reserve Bank’s controversial interest rate cuts have electrified the national housing market.

Based on November sales figures, dwelling prices advanced in all eight capital cities in November, including by 2.7 per cent in Sydney, 2.3 per cent in Melbourne and 0.8 per cent in Brisbane and the Gold Coast where prices are now back near their April 2018 peak.

The 2.7 per cent rise in Sydney prices was the fastest since October 1988, when prices rose by 3.5 per cent, and beats May 2015, when they rose 2.6 per cent.

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Perth dwellings had their first monthly price rise in two years of 0.4 per cent while Adelaide rose 0.5 per cent in November, according to CoreLogic November sales figures released on Sunday.

Treasurer Josh Frydenberg seized on the figures as evidence of “stabilisation” in the housing market, following price declines in most capitals over the past two years that have been blamed for weak consumer confidence and chronically low household spending growth.

“The government continues to support the stabilisation in the housing market by helping first-home buyers get a foot into the market,” Mr Frydenberg said.

“The property sector and millions of Australians who invest in it and rely on it for their income and their job breathed a sigh of relief after the election, having avoided labor’s housing tax, which would have sent prices lower and hurt the economy,” Mr Frydenberg said.

Sydney and Melbourne house prices have recovered to within 8 per cent and 4 per cent of their respective peaks in late 2017, while auction clearance rates in the two biggest cities are above 70 per cent, up from 50 per cent last year.

The national property market had its busiest week since March 2018, with 3058 properties under the hammer across the capital cities last week.

Melbourne had 1497 auctions with preliminary results showing a clearance rate of 78.3 per cent, increasing from the previous week when the final clearance rate fell to 70.1 per cent. There were 1131 auctions in Sydney, making it the busiest week of the year for the NSW capital, with preliminary results showing an 84.7 per cent clearance rate, up from 76 per cent across 940 auctions the previous week.

Results were mixed across the smaller auction markets, with Adelaide and Canberra showing a preliminary clearance rate above 70 per cent, while only about half of the homes taken to auction in Brisbane and Perth were successful. Perth downsizers Stephanie and David Devenish, who bought a house on the hill in beachside Cottesloe after selling their five-bedroom home on a big block a few streets away, believe the market is strengthening.

“I think people are more confident now to sell,” said Mr Devenish, who works in finance.

Real estate agent Candie Italiano of TM Realty says a recent proliferation of buyers in Cottesloe, the suburb where she is busiest, are prepared to make cash offers and pay the full asking price.

Median house prices in Cottesloe fell 4.7 per cent to $2.02m between July 2018 and June 2019. This made the Devenishes apprehensive about putting their former home on the market. They need not have worried; the house sold quickly and they feel lucky to have found their new home close to the beach on a 409sq m block.

Ms Italiano said the last few properties she sold in what is known as the Golden Triangle of Perth real estate were gone within weeks.

The rebound in the property market comes ahead of key national accounts due for release on Wednesday, expected to show, once again, an economy marked by weak business investment and sluggish household spending growth propped up by strong exports. National Australia Bank economists expect quarterly growth of 0.3 per cent in the third quarter, for an annual rate of 1.5 per cent, well below trend.

“We anticipate yet another disappointing report card with growth lopsided and private demand weak,” Westpac economist Andrew Hanlan said.

“RBA rate cuts and modest personal income tax cuts have had a mixed impact: consumer spending remains weak, while the housing sector is responding, albeit in an uneven fashion, with prices rising but dwelling approvals still soft,” he said. On average, capital city dwelling prices have increased every month since July, soon after the RBA rolled out a series of interest rate cuts that have slashed the cash rate to a record low of 0.75 per cent in an attempt to lift inflation and boost household spending.

The RBA board meets on Tuesday, for the final time this year, where it is expected to keep the cash rate on hold. “There are further signs of a turnaround in established housing markets, especially in Sydney and Melbourne. In contrast, new dwelling activity is still declining and growth in housing credit remains low,” governor Philip Lowe said after last month’s meeting.

Private residential construction fell by 3.0 per cent in the third quarter to be 10.4 per cent lower through the year. Housing credit growth has halved to about 3 per cent a year since 2017.

“A stabilisation in the established housing market is an important signal to developers that the foundations of the property market are strong,” Mr Frydenberg said.

“We need to ensure the pipeline of residential construction work is able to meet the market.’’