CoreLogic’s June housing market review reveals the Sydney housing market seemed to be losing some steam and clearance rate fell below 70 percent for the first time since March 2016. This is due to the seasonal decline.
It’s important not to base too many firm conclusions from results taken from one month. Rather, we should be vigilant in monitoring the further development of the market after the weak period.
We’ve included the Sydney property market video below, along with the transcript.
Welcome to Core Logic’s Sydney property market update for June 2017
The Sydney housing market seemed to be losing some steam after five solid views of capital gains of pushed home values seventy-five percent higher.
Dwelling values were flat over the three months ending May 2017 with a 0.7 percent rise in house failures of setting a 3.2 percent fall in unit values.
Auction clearance rates have been trending lower with preliminary numbers for the second week of June, indicating Sydney’s clearance rate fell below 70 percent for the first time since March 2016.
Listing numbers are now higher than a year ago, providing buyers with more choice and a little bit less urgency in their decision making.
Overall the negative May index results from CoreLogic come to the time of seasonal weakness, which may imply that calling a peak in the housing market is premature.
But it’s becoming increasingly clear that some of the heat has left the Sydney marketplace and to a lesser extent Melbourne.
Mortgage rates are now pushing higher
One of the key factors affecting housing market conditions is likely to be the fact that mortgage rates are now pushing higher. Since August last year scattered variable rates have risen by 10 basis points for owner-occupiers and by 35 basis points for investors.
Mortgage rates could rise further, as the recently announced macro-prudential measures from APRA, progressively impact on credit policies and the federal government banking levy comes into effect on July 1st.
Small rises in mortgage rates are likely to have some impact on housing demand considering household debt is tracking record highs.
For investors, the higher cost of servicing the debt comes at a time when rental yields are close to record lows in Sydney and Melbourne, which are also the two cities with the largest concentration of investors. Landlords are likely to try pushing rents higher, but this may be difficult considering the weak wages growth environment and the fact that rental supply is high in some regions.
Other asset classes aren’t likely to be attractive
While we are expecting investment activities are slow, the fact is other asset classes aren’t likely to be as attractive as property to investors.
Cash and bonds continue to provide low bits’ safe returns, and equities remain volatile. Considering the alternatives, we’re likely to see property investment remain a popular option.
Estimated market outlook
If investors are concerned about the run of capital gains and the two largest capital cities coming to an end, more student investors may start changing their focus towards the rental market return, given the possibility of lower capital growth potential.
Yields are much healthier in cities like Hobart Brisbane, and Canberra and the growth cycle is nowhere near as mature as what it is in a Sydney and Melbourne.
In summary, the jury’s still out on whether the housing market has peaked. However, if it hasn’t, a peack could be just around the corner the housing market remains as diverse as ever and the flow of data over the coming months will be a critical factor to get a better understanding of the trends.
Of course, you can stay in tune with regular housing market updates by the CoreLogic website at www.corelogic.com