House prices have risen in Sydney for the first time in two years, with this small but significant upwards move possibly highlighting a near-bottom market. Market confidence is still on shaky ground, however, although lower interest rates and improved property sentiment since the election have increased the outlook. While this small bump in property values may not be much in itself, it comes at a time when price declines are getting progressively smaller, and auction clearance rates are on the rise.
According to figures from CoreLogic's June home value index, national property values fell by 0.2% over the month, with capitals down 0.1%, and regional markets down 0.4%. While these slight price declines are fairly consistent with recent months, both Sydney and Melbourne experienced small but timely price rises. Sydney rose by 0.1% for the month, with Melbourne up by 0.2%. With Australia's two biggest markets down by 9.9% and 9.2% respectively over the last year, even the smallest monthly bumps are significant.
Sydney recorded its first monthly gains since the market peak of July 2017, which is almost two years ago. Melbourne recorded its first monthly gains since its peak in November 2017, which is more than 18 months ago. The situation was not mirrored over the rest of the country, however, with Hobart the only other capital to record positive gains at 0.2%. Both Darwin and Canberra were down by 0.9%, with Perth down 0.7%, Brisbane down 0.6%, and Adelaide down 0.5%.
According to CoreLogic's head of research Tim Lawless, the small price rises in Sydney and Melbourne are part of a wider trend that can also be seen in increased auction clearance rates and bottoming out price declines: "Last weekend we did report that Sydney and Melbourne both returned a preliminary clearance rate above 70 per cent... We have been seeing auction clearance rates consistently improving throughout 2019, and those results have run parallel with Sydney and Melbourne's markets as well, where the rate of decline has been getting progressively smaller."
While there is still a lack of consensus among experts, more people are coming out saying the market is at, or near, a bottom. The current preliminary auction clearance rate is typically associated with stable or rising prices, with monthly results now starting to mirror this sentiment as they swing into positive territory. While there are still lots of worrying signs for the market, including high household debt levels, rising unemployment, and struggling wages growth, rates cuts are having a positive effect on housing demand.
According to AMP Capital chief economist Shane Oliver, "I think it likely is a sign that Sydney and Melbourne are at, or near, the bottom of their downturns... I think what's happened here is that we've still got some negatives out there but the combination of the election result, which removed the threat to the capital gains tax discount and negative gearing, along with RBA rate cuts and some relaxation [in lending standards] by [bank regulator] APRA have resulted in a bit of a bounce in the markets."