Australian dwelling price lift carries into 2020: Matthew Hassan

EXPERT OBSERVER

The recovery in Australian dwelling prices that began in mid-2019 has carried into early 2020, albeit with some moderation in monthly gains from the very strong finish to 2019.

The CoreLogic home value index, covering the eight major capital cities, rose 0.9% in Jan, a touch down on the 1.2% gain in December month and the very strong 2.0% gain in Nov. Annual price growth lifted to 5.2%yr.

Prices nationally have now recovered over two thirds of their 2017-19 correction but are still 3% below their 2017 peak. At the current pace of monthly gains, they should regain that level by mid 2020.

Several factors contributed to the turnaround in 2019 including: reduced uncertainty around housing-related tax policy following the Federal election; 75bps in official rate cuts from the RBA; and some easing in regulatory guidelines around loan serviceability assessments.

All capital cities and regional areas within states recorded gains in Jan with more evidence of price gains starting to show through outside the Sydney and Melbourne markets that have led the cycle.

Sydney recorded a 1.1% rise taking annual growth to 7.9%yr. Prices are up 11.2% from their May 2019 low but still 5.4% below their peak in mid-2017. Houses and top and middle tier properties continue to outpace units and lower tier properties although all tiers and segments have seen a moderation in prices gains month to month.

Melbourne recorded a 1.2% rise with prices up 8.2%yr and just 1.2% below their 2017 peak.

Brisbane dwelling prices posted a solid 0.5% rise lifting annual growth to 1.1%yr, a modest pace but with the quarterly pulse in price growth running the strongest in five years.

Across the other capital city markets: Perth posted a 0.1% gain in Dec, essentially holding flat in recent months; Adelaide prices rose 0.2%, annual growth ticking up into slightly positive (+0.4%yr); Hobart recorded a robust 0.9%mth gain to be up 3.1%yr; Canberra recorded a 0.3%mth gain to be up 3.1%yr; and even Darwin posted a slight 0.1%mth gain despite prices still being down materially on a year ago (–8.1%yr).

Note that seasonal fluctuations do affect prices through the Christmas-New Year period, with gains in December and January typically a touch softer than in Nov.

That said, the moderation from the very strong November rise is consistent with our view that gains will moderate as prices in the key Sydney and Melbourne markets start to near previous peaks and affordability constraints re-emerge.

MATTHEW HASSAN is a Senior Economist at Westpac