April and May composite data points to "modest" slowdown in housing market: Westpac’s Matthew Hassan

A composite of both private sector and ABS housing data points to a "modest slowdown" in housing market growth, says Westpac senior economist Matthew Hassan. 

His comments follow the latest data from RP Data-Rismark showing a surprise 1.2% correction in dwelling values over May despite Sydney auction clearance rates heading for their highest monthly result since April 2002. 

“The latest monthly data on Australia's housing market is a little tricky to reconcile with auction clearance rates hitting new highs in Sydney and recovering solidly in Melbourne, and a range of other market metrics pointing to continued recovery but a notable decline in prices through April-May,” says Hassan.

However, he points out that even in the two major capital cities, auction activity should only really be read as a "partial measure  as they account for about 15% of turnover in Sydney and 20% in Melbourne and tends to cover a different stock of properties compared to private sales".

To account for the volatility in monthly housing market measures, Westpac track six month annualised growth rates “for confirmation of shifts, keeping half an eye on three month growth rates near turning points”. 

It also favours using a composite of the four data providers – RP Data- Rismark, Australian Property Monitors (APM), ABS and Residex - to “strip out some of the measurement 'noise'”.

“On this basis there has been a modest slowdown from a 3.5% annual pace over the second half of last year to around 2% currently," says Hassan.

But, he adds, if the April-May weakness extends into June and is confirmed by other measures, that could be a more “pronounced slowing”.

 “Interpretation-wise, there are a few things that may account for the 'wedge' between the strong auction indicators and soft price growth – it may be that sellers are accepting lower prices in order to get sales or it may be that there is more pronounced weakness outside of the 14-20% of sales that go via auction. 

“That said, the divergence is not normally that large. 

“On balance we would tend to favour the auction data for now but will as it stands the price data is showing no indication of following earlier high clearance rate periods into double-digit price growth territory,” he says.