11 December 2019
The Real Estate Institute of Australia’s September quarter median price results indicate that the trough in the most recent pricing cycle for Sydney and Melbourne was reached in June, and that a new cycle of price growth is now emerging. 

Australia’s median house price in the September quarter was $743,800, reflecting a quarterly increase of 2.6% – the first quarterly rise in the median since March 2018 and the strongest since early 2017. The median unit price in the September quarter, at $577,100, also increased by 2.6%. Similarly – this was its first quarterly rise since March 2018. 

A combination of factors in recent months has boosted market sentiment noticeably and seen the residential market move out of its price trough, including: 
  • the Coalition's victory in the May federal election;
  • a loosening of APRA’s earlier credit constraints, which is translating into signs of renewed lending growth, initially to owner occupiers and now investors; and
  • three 25bp interest rates cuts by the RBA, pushing mortgage rates to record lows and below 3% in some cases.

FOMO, or fear of missing out, seems to be at play at present. Buyer interest has certainly strengthened, with time-on-market indicators peaking and auction clearance rates in Sydney and Melbourne pushing above 80% recently, from below 50% 12-months ago. However, stock on the market remains low. This means there has been strong competition amongst buyers, which has amplified the recent price growth, with prestige markets appearing to be the first beneficiaries.

It is expected that the price growth witnessed in recent months will encourage more sellers to enter the market, increasing available stock. This may lead to a moderation in price growth as we move into 2020. Nonetheless, prices are still expected to increase solidly over the course of the year. Attention may also turn to more affordable markets, such as Brisbane and Perth, if Sydney and Melbourne prices continue to rise.

It will also be interesting to monitor whether a continuation of price rises in the new year will temper the RBA’s appetite for further interest rate cuts in 2020, even if economic headwinds provide justification. Alternatively, there may need to be a return to tighter regulatory controls on lending as a balance.


table residential price trough

As highlighted above, at this early stage, national price rises have been very much driven by the two largest capitals: Sydney and Melbourne.

Assuming June was indeed the low point for Australia’s two largest markets, peak to trough declines in median house prices equated to: 
  • a 14.0% drop in Sydney (from June 2017); and
  • a 6.4% drop in Melbourne (from March 2018).

Both have ultimately held after earlier expectations of peak to trough declines of as much as 20%.

It needs to be remembered that from the start of 2012 to their peaks, Sydney’s median house price rose by nearly 90% while in Melbourne, the increase was close to 70%.

Mining-driven Perth peaked much earlier (in December 2014), with the current median 14% lower. Brisbane, Adelaide and Canberra did not see the same level of price growth as Sydney and Melbourne. Consequently, price adjustment has also been more modest.

These results are backed up by the Australian Bureau of Statistics residential property price measure, which rose by 2.4% in the September quarter, the strongest quarterly growth recorded since December 2016. Again, Sydney and Melbourne were the drivers, both increasing by 3.6%.

Later results from other data providers suggest price growth has accelerated in both capitals since the end of the quarter and is spreading to other markets.
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