Doubts cast over touted market rebound

Market observers are increasingly confident of a rebound in the housing market, with recent indicators suggesting that green shoots have begun to emerge following a prolonged downturn.

According to the latest data from CoreLogic, national home values rose by 0.9 per cent in September, following an increase of 0.8 per cent in August – the first monthly rise since April 2017.

The national improvement was largely driven by an upturn in Sydney and Melbourne, where home values have increased by a cumulative 3.6 per cent and 3.5 per cent, respectively, over the past four months.  

Home loan activity has also picked up, with the latest data form the Australian Bureau of Statistics (ABS) revealing that the value of housing finance approvals rose 5.1 per cent (seasonally adjusted terms) in July – the largest monthly increase since March 2015.

According to CoreLogic’s head of research, Tim Lawless, the market is showing signs of a ‘V-shaped’ recovery.

“From my perspective, the rebound we’re seeing in Sydney and Melbourne now is much faster than I would have expected it to be in April or May this year,” he said.

“We’re expecting Sydney values and Melbourne values to be up about another 1.5 per cent in September following a similar result in August. 

“We’ve already seen the market recover nearly 4 per cent since it bottomed out around May.”

He added: “It does look like there’s maybe a bit of a ‘V-shaped’ recovery, which is something that I previously didn’t think would happen.”

However, speaking to Mortgage Business, managing director of Better Mortgage Management Murray Cowan said he is unconvinced that the market has turned a corner.

Mr Cowan said he expects uncertainty in the global marketplace, particularly in light of the US-China trade war, to stifle any meaningful pick-up in market activity.

“Sure, there’s been a pick-up in housing credit and property prices, and I think they are reasonably aligned, but I see that it’s probably a bit of an adjustment,” he said.

“Perhaps markets overshot on the upside a couple of years ago and perhaps have now overshot on the downside.

“I would see that the market is maybe just adjusting back to normal, and so there might just be steady growth without being boom and bust.”

Mr Cowan also noted that market conditions remain varied across the country, with some regions continuing to face downward pressures.

“Some markets are struggling to get going again, particularity in Western Australia and, to a lesser extent, Queensland, where the drought is having a bit of an effect on confidence,” he said.

“I probably wouldn’t be one that’s in the camp saying, ‘Housing credit and property values are going to keep going up for the foreseeable future’. 

“I think that it might be more a case of an adjustment and then steady growth after that.”

Mr Cowan also questioned the timing of the Reserve Bank of Australia’s (RBA) decision to cut rates for the third time in five months, echoing the sentiment of ING Economics’ head of research, Asia Pacific, Robert Carnell.

“I know that the money markets and the financial press wasn’t surprised by the October rate cut, but I thought they could have waited a little longer just to see if there were some positive effects from the earlier rate cuts and the tax reduction as well,” Mr Cowan added.

[Related: RBA decision called into question]