Australian home prices will bottom later this year. ‘The correction is nearing its end’: HSBC says.

Australia’s housing market downturn, already one of the largest on record in terms of price falls and duration, is likely to come to an end in the second half of this year, says Paul Bloxham, Chief Australia and New Zealand Economist at HSBC.

  • Australia’s housing market downturn, already one of the largest on record in terms of price falls and duration, is likely to come to an end in the second half of this year, says HSBC.
  • The bank says “evidence of some stabilisation in the housing market is starting to accumulate”.
  • HSBC says there have been few signs of distressed sales with mortgage loan arrears and defaults are low.
  • Australia’s median home price has fallen 7.9% from September 2017. Capital city median values have fallen more than 10%.

“Evidence of some stabilisation in the housing market is starting to accumulate,” Bloxham said.

“Auction clearance rates in Sydney and Melbourne are picking up, albeit from low levels, as are loan approvals, particularly for first home buyers.

“The pace of decline in housing prices has slowed recently and consumer sentiment surveys suggest that a rising share of households now see it as a ‘good time to buy a home’.”

Data released by CoreLogic earlier this month showed that while median home prices fell across all capital cities in April, except Canberra, the overall pace of nationwide falls slowed to 0.5%, continuing to moderate from the levels reported earlier in the year.

Much of deceleration in price falls has been in Sydney and Melbourne where median values slid by 0.7% and 0.6% during April, slower than the 1% plus declines seen in December 2018 and in January this year.

While the moderation may reflect seasonal patterns — typically prices are stronger in Autumn and Spring, but weaker in Winter and Summer — Westpac’s Australian economics team, like Bloxham, said recent trends are consistent with other Australian housing market indicators.

“We are seeing further evidence that the worst of the housing market conditions are now behind us,” Tim Lawless said earlier this month.

The expanded table below from CoreLogic shows price movements for the capitals and regional areas, including by dwelling type, over the past month, quarter and year.

The expanded table below from CoreLogic shows price movements for the capitals and regional areas, including by dwelling type, over the past month, quarter and year.

“Values are still broadly declining, however the pace of decline has moderated since December last year and there are some tentative signs that credit flows have improved, albeit from a low base.”

“As housing prices have fallen, turnover of dwellings has slowed and this has weighed on sales of motor vehicles and furniture, which are goods which often get sold when houses are exchanged. However, much of the rest of the consumer spend has been fairly well supported. Consumer sentiment is above average and has been so through most of the housing market correction.”

“Mortgage serviceability remains strong because interest rates are low and the jobs market has been improving. Employment growth is currently above average, the unemployment rate is at an eight-year low of 5% and job vacancies are at a record high as a proportion of the workforce.”

Bloxham also points out that in New South Wales and Victoria — where the largest housing price corrections have occurred in the recent cycle — unemployment rates are at the lowest levels since the mid-1970s.

Posted in Buy, News, Sell on 13th May, 2019