- Weighted average for clearance rates has fallen over the past month
- Housing supply has increased, in part due to new dwellings
- Migration is at low levels due to border closures
As reported earlier this month, Australian property prices grew at their fastest rate during the March quarter since 1988. Factors causing this exuberant growth include low mortgage rates, stimulus measures, low housing stock and increased consumer confidence due to the better-than-expected economic recovery.
Tim Lawless of CoreLogic, however, has hinted the market may already be peaking as property prices have slowed down based on four-week rolling data on dwelling values in the major capital cities. He has given several reasons why he believes this has occurred.
“This isn’t to say housing values are about reverse; a more likely scenario is the housing market is moving through a peak rate of growth and the pace of capital gains will gradually taper over coming months.”
Tim Lawless, CoreLogic
Data from CoreLogic has also shown clearance rates have slowed.
During the last week of March, the weighted average clearance rate hit 83.1% but according to data for the week ending 18 April, this has dropped to 78.6%. Historically, there has been a positive correlation between the pace of housing values and auction clearance rates.
There has also been a rise in vendor activity, with sellers taking advantage of the strong demand. The four weeks ending 18 April saw 26,470 newly advertised properties listed in the capital cities – the largest increase in new listings for this time of the year since 2016 and 17% above the five-year average.
New housing stock has been cited especially given new building activity skewed towards houses as many larger cities currently have an oversupply of units. Dwelling commencements over the December quarter were close to 20% above the same time the previous year. HomeBuilder in particular has driven new housing stock.
For the first time since 1916, Australia’s population event went backwards for a quarter due to closed borders and stalled overseas migration, a factor Mr Lawless believes has also fed into slowing house price growth.
“The timing of a return to higher housing demand via population growth remains uncertain until international travel and migration resumes.
“Stalled migration has had a more direct and immediate impact on rental markets, due to the fact that around 70% of Australia’s overseas migrants arrive on a temporary basis.
“Of the roughly 30% of migrants that arrive in Australia with permanent intentions, most would rent before buying, so the impact on buying demand is more gradual.”
