Housing market cooling

MODEST growth in residential listings across Australia in May suggest the national market is still strong, but it has reaffirmed the outlook that the overheated market is cooling.

New data from SQM Research showed national listings were up by 0.5%.Whilst this was led by Sydney’s 5.9%, SQM managing director Louis Christopher said that this was “a little on the weaker side”.

“I also note the monthly decline in asking prices of 1% for that city.  While it is still too early to call a slowdown in Sydney at this stage, we are watching this market closely as there has been increasing evidence of a possible slowdown,” he added.

He said Melbourne’s listings activity and asking prices suggest very robust market conditions throughout May.

“To record a 1.2% decline in listings plus a near 6% surge in asking prices for houses is about as strong as it gets,” Christopher said.

Melbourne’s listings have fallen by 19.5% over 12 months. The data was released on the same day the Reserve Bank maintained interest rates at 1.5%, as widely expected.

SQM found national asking prices were flat for houses and down 0.4% for units in May, and up 8.3% and 3.3% respectively over 12 months.

Asking prices were up by 5.9% for Melbourne’s houses and 2.4% for units over the month, and down by 1.1% and 1.0% in Sydney. Annual figures showed year-on-year gains of 22.6% and 9.1% for Melbourne and 15.0% and 6.5% for Sydney.

Christopher recently forecast growth in Sydney this year between 11% and 16%, and of 10% and 15% in Melbourne over 2017.

The ANZ this week was more forthcoming about its prospects of a market on the slide, saying, “price growth will slow sharply due to a combination of policy changes and macroprudential regulation.”

“Nationwide housing price growth has peaked, and we expect prices to slow sharply this year and next,” senior economist Daniel Gradwell said in its latest Australian Housing Update.

“ANZ believe that the housing market will steadily cool going forward. The combination of further regulation and changes to Government policy tighter borrowing conditions, and out of cycle mortgage rate increases, are all expected to weigh on the outlook for prices,” the report said.

ANZ expects dwelling prices across the country to rise by 4.5% year-on-year through 2017, before slowing further to 1.9% in 2018, with continued divergence across regions.

It believes house price growth in Sydney peaked at 20% year-on-year in March, and Melbourne at 17% year-on-year.

“Price growth in Sydney and Melbourne is expected to slow to well below historical averages, but remain positive as demand and population growth remain elevated. On the other hand, prices are expected to ease slightly through 2018 in Brisbane, given the significant volume of supply due to hit that market.

“The potential over supply of apartments remains a key concern, particularly in Melbourne and Brisbane, where prices are already under pressure,” Gradwell said.

Prices in Perth and Darwin are tipped to continue to fall over the next 12-18 months, mining investment continues to decline.

Canberra, Hobart and Adelaide are expected to see growth slightly above the nationwide average through 2018, partially due to price growth in these regions being relatively subdued.

Sydney, Brisbane, Adelaide and Darwin all returned falls over the month in asking prices for their housing and unit markets.

Hobart saw monthly growth in asking prices of 1.2% for houses and 4.1% for units, and 14.1% and 13.2% annually, as listings fell 5.7% in May and by 18.9% over 12 months. Brisbane saw an upwards monthly change of 3.2% in listing and 1.0% drop annually.

Meanwhile ANZ CEO Shayne Elliott said in an interview with Bloomberg Television’s that house prices are very inflated.

Elliott said in Sydney, prices have gained 75% in the past five years, ranking it behind only Hong Kong as the world’s least affordable housing market.

Although Elliott does not believe the market will crash, adding that it is “a really low probability, but it is certainly something we stress test a lot, and think about.”

Australian Property Journal