Signs suggesting that Australia’s housing market may be moving through the peak of the current growth cycle are mounting according to CoreLogic RP Data head of research Tim Lawless.
Mr Lawless said, “It’s important to remember that strong housing market conditions have been evident in Sydney and Melbourne while every other capital city has shown relatively sedate conditions.”
The September CoreLogic RP Data home value results released two weeks ago showed that Sydney dwellings values remained flat over the month. Simultaneously, other data flows are pointing to a moderation in growth conditions across Australia’s largest city and the broader housing market.
Mr Lawless cites the following as key factors hinting at a market peak:
- Auction results have been consistently moderating, especially in Sydney where clearance rates have been sub 70% consistently over the past five weeks.
- Listing numbers are rising, which is normal during the Spring season, but a higher than normal number of homes are being added to the market in Sydney which is contributing to higher stock levels than a year ago and rising months of supply.
- Investment demand is moderating due to both tougher lending from the banks as well as market disincentives such as low yields, affordability constraints and a mature growth cycle.
- Mortgage related activity has fallen across CoreLogic RP Data platforms. Although activity remains higher than a year ago, mortgage related events are down from heights seen over the first half of 2015 and aren’t seeing their normal spring bounce.
- Rents are hardly moving which has pushed rental yields to historic lows in Sydney and Melbourne. Paying a landlord is likely becoming more affordable than paying a mortgage despite the low interest rate setting.
- The cost of debt is raising outside of any upwards movement in the cash rate. Higher debt servicing costs can only act as a disincentive.
- Supply levels are set to rise further as the pipeline of approvals moves through the commencement phase and onto completed housing product. Inner city apartment markets are most exposed to higher supply.
Mr Lawless said, “While conditions may be starting to slow, particularly in Sydney, the coming months will provide further clarity about housing market conditions.
“Picking the turning point in the housing market is easy in retrospect. As the market evolves it can be hard to separate short term movements from the beginnings of a longer term trend.”
“The coming months of data flows through to the end of the year will provide a great deal more perspective.”
“A slowdown in housing market conditions, particularly in Sydney where growth rates have been extreme and affordability is challenging, will be a welcome development for prospective buyers.
“Listing numbers are moving higher, providing more choice and taking away some of the urgency that many buyers have been faced with when considering to purchase in this fast moving housing market,” Mr Lawless said.