Strong auction results across Sydney and Melbourne suggests property prices in those struggling markets could rise 10 per cent in the next 12 months, an economist says.
The clearance rates for houses going under the hammer improved again over the weekend, but the material indications that the national market has bottomed out are yet to encourage higher volumes going to auction.
Property analytics firm CoreLogic said Sydney recorded a preliminary clearance rate of 81.5 per cent across 303 auctions, with prices in the Harbour City edging 0.1 per cent higher over the week.
While that clearance rate is likely to revise down to the mid-70s once remaining results are collected, that’s a huge improvement from the same point last year.
Melbourne prices also rose 0.1 per cent as it hosted 416 auctions at a preliminary clearance rate of 70 per cent.
The positive indicator is further proof the market has seen the end of its sustained downturn as a range of housing stimulus takes effect.
A Bill Shorten election loss which denied the end of negative gearing and capital gains tax, combined with the Reserve Bank slashing rates to its lowest ever levels and the Australian Prudential Regulation Authority removing the serviceability buffer for borrowers have all created a positive environment for the sector.
Sydney prices have been in a downward spiral for months.Source:Supplied
Clearance rates in Sydney are about 45 per cent stronger compared to last year, an improvement AMP chief economist Shane Oliver said would typically suggest prices could rise up to 10 per cent in 12 months.
“Historically, once clearances move higher than volumes eventually start to pick up again,” he told news.com.au.
“More property comes to the market and eventually that results in higher prices.
“The property cycle has turned and prices have probably bottomed, but the debate is about how strong the upswing’s going to be.”
But Dr Oliver says a number of prevailing factors will mean the rebound won’t be as strong as the data suggests.
“Lending standards are a lot tougher therefore it’s still going to be harder to get a loan,” he said.
“There’s a lot more supply hitting the market than there was in around 2012-2013 when we last saw a big rebound in clearances.”
The economist said a likely rise in unemployment would also be a factor.
“So while I think we have probably seen the bottom for the property market and the outlook has improved, I think it’s going to remain fairly constrained over the next 12 months,” he said.
According to the CoreLogic data, 901 homes were up for offer across all capital cities in the seven days to Sunday, compared to 1257 a year ago.
But spring is when stock rushes to the market and Dr Oliver predicts this year’s season to be the busiest since 2016 as many held off selling while prices were weak.
“Once we start to see more supply coming into the auctions, then the clearances will probably come down a bit,” he said.
“It’s hard to believe things are this strong, it’s improved but it’s debatable as to whether the raw clearance figures would suggest.”
Dr Oliver said there hadn’t been so few houses up for sale since 2012.
“It is quite likely that when supply picks up coming into the spring and as buyers realise that it’s more difficult than it used to be to get a loan, then I think the clearance rates will probably settle back down again,” he said.