“Housing market finds a floor”

On Friday Jellis Craig hosted our inaugural Property Event for over 450 guests at The Glasshouse.

Hosted by Melbourne-local Alicia Loxley, the morning of insights featured a line-up of notable speakers including Property Economist Tim Lawless and Demographer Bernard Salt.

It was a fantastic event.

Given my predilection towards numbers, graphs and statistics, (Carla calls me Rain Man) I was utterly engrossed by Tim Lawless’ presentation entitled, ‘Housing market finds a floor’.

Tim’s succinct compilation of CoreLogic data confirms and supports precisely what we have been seeing and experiencing on the ground over the last 18 months, and in particular, the improvement in the market in recent months.

Below is a summary of his interpretation of the market, based on the best property data and insights available:

• Following a 9.1% drop, CoreLogic’s national house price index showed a second month-on-month rise in housing values through April, posting the first rolling quarterly gain since May last year.
• The 9.7% drop in capital city dwelling values was the second largest peak-to-trough decline since at least 1980, but the decline trajectory was steeper relative to previous downturns.
• Melbourne values fell by 9.6% from the recent peak to what looks to be a trough in March, with the decline trajectory following the trend observed through GFC almost perfectly.
• The premium end of the market tends to lead the cycles (with the inner-east leading the recovery so far).
• The positive shift in housing values coincides with a steep increase in international and interstate migration (into Melbourne).
• Rising demand has collided with low levels of supply, with new listings tracking at 18% below the previous five year average for this time of year.
• The rental market is extremely tight with record low vacancy, and rents rising to new record highs each month.
• Though rents are rising, the cost of mortgages have risen far more.
• More investors are selling and fewer are buying, further reducing rental supply.

Tim closed his presentation on the Melbourne housing market with a slide entitled: ‘Solid fundamentals with a positive outlook’.

He cites that there are still some challenges ahead. For example, households are yet to feel the full impact of the rapid rate hike cycle, economic conditions may weaken, and lending and credit policy remains tight.

However, he also suggests that there are strong ‘tailwinds’, such as interest rates nearing their peak, inflation reducing, low stock levels to continue, and surging migration.

So, on balance, his take is that sentiment should improve as interest rates stabilise or even decline, leading to a lift in housing activity.

Tim believes this will ultimately lead to subtle growth returning to housing values through the second half of this year, but he’s not expecting a material lift until interest rates drop or credit policy eases.

All very interesting!

My take is that Stonnington has seen an even more amplified version of the correction (and recovery) compared to the broader Melbourne market.

A 9.6% fall in median house prices across Melbourne means that some properties in Stonnington have fallen by 20 percent (e.g. land on a main road), while others have not fallen at all (fully renovated family homes).

An 18% drop in new listing activity across all properties in Melbourne likely translates to a 25 – 40% drop in Stonnington for established period homes.

Auction numbers are down by even more than that.

On Saturday, the REIV reported an 80% clearance rate across 533 auctions. The same weekend last year had 1029 auctions.

Jellis Craig saw an incredible 87% clearance across our 70 auctions.

You can’t argue with those numbers… It’s a seller’s market once again.