Tangible evidence of stronger property markets: Hotspotting's Terry Ryder

Tangible evidence of stronger property markets: Hotspotting's Terry Ryder
Tangible evidence of stronger property markets: Hotspotting's Terry Ryder

EXPERT OBSERVER

If sentiment was money we’d all have got richer in the past month. Pretty much everyone in property has felt the perceptible change in vibe since a series of fortunate events snowballed through the winter market: the election, the demise of Bill Short-sighted and his tax policies, the APRA easing, the interest rates decision, help for first-home buyers and the income tax cuts.

People who provide services to real estate have felt the mood change - but it will take time before consumers, the people who really matter, can touch it and taste it. APRA hasn’t actioned it policy changes, consumers aren’t yet living the lower mortgage rates, FHBs can’t bank the promised assistance and the tax cuts are still a long way from our hip pockets.

The changes will take time to show up in research depicting an uplift in markets. The ABS recently published its price data for the March Quarter – it won’t be until they publish their September Quarter figures towards the end of 2019 that we might see the positive changes reflected in ABS figures.

So how do we know that anything tangible is happening as a result of the recent sugar hits to sentiment?

Little by little, we’re seeing growing research evidence of a turnaround in fortunes for property markets in Australia’s biggest cities. 

Auction clearance rates are improving, vacancy rates are dropping, rents are rising, price decline is bottoming out and the pickup in consumer sentiment is being quantified in surveys.

Two major indicators which measure short-term changes in prices in the capital cities indicate that the slump in property values is coming to a halt. CoreLogic’s Property Market Indicator data shows a trend of improvement in the daily Home Value index for the capital cities – firstly the rate of decline showed and then we saw recent weeks of no change. The Home Value Index for June showed small monthly improvements in Sydney, Melbourne and Hobart, while those three cities plus Darwin showed monthly increases for units.

The Asking Prices Index from SQM Research has shown more even positive outcomes, with the indexes for Sydney, Melbourne, Brisbane and Hobart all recording weekly rises, while Sydney, Melbourne, Canberra Adelaide, Darwin and Hobart have all achieved monthly increases.

We have to resort to these wobbly short-term measures on prices, because it will take some time before the long-term trends are evident. I don’t like weekly indexes much, but there has been a steady pattern emerging in both the SQM and CoreLogic measures – and that trend has been one of recovery and improvement.

Tyron Hyde, director of depreciation experts Washington Brown, says the uncertainty that existed two months ago has been removed from the minds of investors and home-buyers, and sentiment has improved in the  big city markets.

“Everyone I speak says there’s been a 10% uplift in the market,” Hyde says. “I don’t think that means a return to big price growth, but it has put a floor under those markets that wasn’t there a few months ago.”

All that’s being reflected in some of the surveys. The Westpac sentiment survey has reported a “spectacular” rise in expectations of house price increases and a general improvement in sentiment from real estate consumers. “Housing-related sentiment showed a clear response to the lowering in interest rates,” says Westpac senior economist Matthew Hassan.

The time to buy a dwelling index showed a 1.8% rise to 116.9 points, while the house price expectations index recorded a “spectacular” 22.7% rise. “This is the highest level since August 2018,” Hassan says.

Meanwhile, the latest edition of ME’s Quarterly Property Sentiment Report shows that seven out of ten real estate consumers feel positive or neutral about the market. It found 37% feel neutral towards property overall, while 35% feel positive and 28% feel negative. 

Auction outcomes continue to provide evidence of improvement in the big city property markets. The latest data suggests June was the strongest month for auction outcomes since September 2017 in Sydney and since February 2018 in Melbourne.

The preliminary clearance rates for the weekend were 68% for Sydney and 73% for Melbourne, which are quite strong results, especially compared to the same time last year.

Interest in mortgages rose dramatically in the days following the Reserve Bank cash rate reduction in early June, according to comparison site Finder.  Traffic to home loan deals on Finder jumped 654% in the 48 hours after the RBA announced the cash rate reduction. Interest in variable rates on Finder grew by 564%, while there was a 369% spike in those looking to refinance.

Residential rents continue to rise in most Australian capital cities, both in monthly and annual terms. Figures from SQM Research show that the Weekly Rents Index has risen in the past year in all cities except Darwin and Sydney. The Indexes have shown similar trends in the past month.

This reflects a general decline in vacancy rates. According to SQM, vacancy rates fell or remained steady in all eight capital cities in May. The national average vacancy rate is 2.2%, well below the 3% benchmark.

As we go forward, I expect the pile of tangible evidence of revival to grow. For people who work in the real estate space, the second half of 2019 is going to be a lot more fun than the first six months.

Terry Ryder is the founder of hotspotting.com.au

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Terry Ryder

Terry Ryder

Terry Ryder is the founder of hotspotting.com.au.

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Terry Ryder

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