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Tale of 2 cities as lockdowns threaten to slow property growth
Despite Australia’s two largest cities acting in polar opposite directions, the overall housing market remains strong, an economist has revealed.
Tale of 2 cities as lockdowns threaten to slow property growth
Despite Australia’s two largest cities acting in polar opposite directions, the overall housing market remains strong, an economist has revealed.
The property market had another bumper month in August, shaking off lockdowns, with slowdowns predicted to only be temporary, placing further strain on affordability issues.
In his latest analysis, AMP Capital chief economist Dr Shane Oliver pointed to the strong national growth, with CoreLogic data showing national dwelling prices rose by 1.5 per cent in just the month of August alone.
This is leading to overall growth of 18.4 per cent in one year, which is the fast rate of appreciation in 32 years.
Not only is record growth continuing, national dwelling prices are now 13.4 per cent above record highs in September 2017.
While the market is still showing strong signs of growth, Dr Oliver noted that it is a tale of two cities, with Sydney and Melbourne behaving differently despite both facing heavy lockdown restrictions.
“Sydney has seen a sharper fall in listings relative to demand, suggesting greater confidence in the economic and property market outlook on the part of home owners, and buyers in Sydney, and consequently clearance rates, actually increased in August,” Dr Oliver said.
“By contrast, Melbourne has seen less of a fall in listings and relatively weaker demand, suggesting far less confidence in the economic and property market outlook in Melbourne, resulting in a sharper fall in clearance rates, albeit not yet as bad as occurred last year.”
Meanwhile, cities like Brisbane and Adelaide are starting to play catch-up after years of underperforming the two leaders, with Dr Oliver stating relative absence of community coronavirus cases acting as a tailwind for the city.
Impact of lockdowns
While Aussies looking to get into the market might be hoping for a period of decline in the housing market, Dr Oliver stated that lockdowns will not have a longer-term impact on housing.
“The lockdowns in Sydney, Melbourne and Canberra risk driving some further slowing in near-term price gains, particularly as data starts to show a rise in unemployment,” he said.
Dr Oliver said beyond the near-term risks posed by the lockdowns, dwelling price gains are expect to slow further next year, reflecting deteriorating affordability.
“[It is] likely APRA moves at some point to slow lending growth, a resumption of rising bond yields and hence fixed rates from later this year and a likely shift from years of housing undersupply to oversupply as a result of strong levels of home building but two years of zero immigration,” Dr Oliver said.
“But we have revised up our expectation for average dwelling price gains through next year to 7 per cent from 5 per cent as monetary policy is now likely to be easier for longer.”
Spurred on by ultra-low mortgage rates and low stock levels, the economist pointed out a quick starting economy could see house prices only dwindle for a short period.
He said: “With average home prices already up by 15.7 per cent year to date, and even allowing for some additional slowing in home price gains in the next month or so as a result of the lockdowns, average capital city home prices are still likely to be up by around 20 per cent this year.
“Prices in Sydney are already up by 19.8 per cent year to date and are likely to be up by around 24 per cent this year.”
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