In its analysis of CoreLogic’s Home Value Index for the month of December, ANZ claimed that the figures “don’t take into account the seasonality in house prices”.
“At face value, CoreLogic’s December house price data indicates that the pace of monthly declines is accelerating, with the fall in December outpacing the decline in November,” ANZ noted.
“But these numbers don’t take into account the seasonality in house prices. When the data is adjusted for seasonal influences, then the interpretation of recent house price developments changes considerably.
“The peak monthly decline in house prices was October, with prices effectively flat in November and December.”
CoreLogic reported that in the month of December, house prices dropped by 1.08 per cent in Sydney. However, ANZ believes that the market is stabilising, following a peak decline in house prices recorded in October.
“[In Sydney], the pace of price declines was greatest in October, with a smaller fall in November and then again in December,” the bank said.
“All of which suggests that the worst may be behind us in terms of house price weakness.”
The major bank has called for analysts to cautiously interpret end-of-year house price data. It predicted that “annual house price inflation” is set to slow further, but it does not expect significant weakening.
“Of course, the price data at this time of the year can be on low volumes and volatile, so we have to be a little careful with our interpretation,” ANZ added.
“Critically, the auction clearance rate has been telling a story of likely stability in house prices for some time.
“Base effects mean that annual house price inflation is likely to slow a little further from here, but we think the data is saying that for annual house price inflation to weaken much from here, a new catalyst is required.”
In its analysis, the bank concluded that an expected cash rate increase by the Reserve Bank of Australia (RBA) could be the “catalyst” for a sharper drop in house prices, but it noted that the opposite is true if the regulator decides to hold the cash rate at 1.50 per cent.
ANZ’s analysis said: “We have a new catalyst in our forecasts in the form of an RBA rate hike in May.
“The growing expectation of this and then its delivery is why we have annual house price growth getting close to zero by the middle of the year.
“But if our view on the RBA turns out to be wrong, we think one consequence will be higher house prices than we currently expect.”
[Related: Sydney drags down national home values]