While property values have charted eight consecutive months of growth, with the CoreLogic February 2020 Home Value Index showing home prices reach a record high in five of Australia’s eight capital cities, the momentum seems unlikely to hold given the affordability concerns guiding Aussie homebuyer behaviour.
“The primary factors driving this rebound remain in place and include an extremely low cost of debt and improved borrowing capacity,” explained CoreLogic head of research Tim Lawless.
“However, considering the sluggish pace of household income growth, housing affordability is eroding rapidly which is likely to see some parts of the market become less active.”
CoreLogic forecasting sees affordability constraints gradually pushing demand towards the middle and outer ring suburbs in Sydney, Melbourne and – to a lesser degree – Hobart, given the cheaper price points and lower barrier to entry in the medium to high density sector. Additionally, investors see higher rental yields in these more affordable segments of the market.
Given that affordability pressures are less severe outside of these hotspots, regions such as southeast Queensland and Perth which are trending higher in jobs growth and lower in unemployment, could be the “markets to watch” for a stronger performance later in the year.
The data from CoreLogic also highlighted “some early signs” the rate of growth may have already peaked late last year across Sydney and Melbourne, as affordability constraints dampen participation in the market and advertised supply levels increase.
According to the February index, national housing values are 7.9% higher than they were at their bottom in June, with Sydney and Melbourne continuing to exhibit the strongest growth, sporting values 13.1% and 12.6% higher than their floors respectively.
While the most recent figures may seem positive, there are many additional factors at play which temper the optimism they might otherwise arouse.
“A more significant downturn in consumer sentiment related to the coronavirus outbreak could become a determining factor that impacts the market over coming months. Consumer sentiment readings are already low, and a further deterioration could see housing market activity start to slow,” said Lawless.
The report also confirmed that regional markets are lagging far behind the capital cities, with housing values only 1.4% higher over the past twelve months as compared to the 7.3% rise evidenced across the major cities.
