Sydney house prices resumed rising at a faster clip in August, increasing 1.1 per cent over the month, and defying any expectations of a double-dip downturn in values, data from CoreLogic shows.
Home values also re-accelerated in Melbourne, Brisbane and Canberra, but slowed in Perth and Hobart.
The rate of Sydney house price growth had eased to 0.9 per cent in July. That was the smallest gain since prices began rising in February and sparked concerns the market was in danger of tipping back into a downturn.
Tim Lawless, CoreLogic research director, said while price growth could still ease in the coming months as more listings hit the market, the earlier gains were unlikely to be reversed.
“It's clear the housing market has moved through its downturn phase and the recovery has spread out and become established, so I'd say the risk of a double-dip downturn is looking less possible with each month, going by further rises in housing values,” he said.
“Despite tighter lending and lower borrowing capacity, buyers are clearly still finding ways to enter the housing market and absorbing the additional stock.
“Rising home values might also motivate home owners to hold on until interest rates start to come down as they start seeing the benefits of rising prices and their home-ownership.”
Sydney has led the recovery, with home values climbing 8.8 per cent since bottoming out in January this year, inching closer to a 10 per cent gain over 2023 as predicted by Westpac.
“Even if prices slow, they're still holding around 1 per cent month-on-month, so you're looking at well and truly double-digit growth across a market that's unaffordable, at a time when lending has tightened and listings are rising,” Mr Lawless said.
“There's been a fairly broad-based lift in demand across Sydney, likely from first-home buyers, investors and upgraders or downsizers, despite pressing affordability constraints.”
Listings in Sydney increased by 9.8 per cent in the past two months from a low base but still lower than a year ago.
St George senior economist Pat Bustamante said the cash rate remaining on hold for the second consecutive month had played a role in lifting demand broadly.
“This gave potential buyers the confidence that rates are at, or close to, the peak,” he said.
“Given the cash rate is at, or close to, the peak, nominal income levels picking up, reports of intergenerational wealth transfers allowing younger Australians to get into the market and the still-strong jobs market, at this point we expect demand to absorb supply, but it could get bumpy month to month.”
House prices in Melbourne also picked up speed, rising by 0.2 of a percentage point to 0.5 per cent. Brisbane lifted by 0.1 of a percentage point to 1.5 per cent, while Perth slowed by the same amount to 0.9 per cent.
Growth momentum also slowed in Adelaide with prices increasing by 1.1 per cent, slower than the 1.4 per cent recorded last month. Canberra gained 0.3 per cent and Darwin increased by 0.8 per cent, but Hobart fell by 0.1 per cent. Nationwide, dwelling values increased by 0.8 per cent.
Over the year, Sydney prices have increased by 1.2 per cent, Adelaide by 2.2 per cent and Perth by 4.5 per cent, but prices have declined across the rest of the capital cities.
AMP chief economist Shane Oliver said that despite the recent strength in prices, the housing market was not out of the woods yet.
“So far, the underlying demand from the surge in immigration is continuing to dominate the rise in interest rates, but I think the big test is still ahead of us as we see listings accelerate through the spring selling season,” he said.
“The unemployment rate is now starting to rise as the economy weakens. We've also still got a large number of fixed rate mortgages to fully transition into variable rate, and we're only halfway through the fixed rate roll-overs for this year.”
A national survey conducted by AMP Bank found seven in ten home owners with a fixed mortgage have no clue about the variable revert rate they would roll on to.
Meanwhile, one in five home owners were not aware of their home loan's current interest rate, while a quarter have no idea when their fixed rate is due to expire.
“This shows that a lot of home owners may not be prepared for the large increase in their mortgage repayments, which could cause financial shock,” Dr Oliver said.
“It shows that many property owners were unaware about the level of mortgage pain they're about to face, so there's a bit of uncertainty around the number of potential distressed sales.”
*** Credit - Nila Sweeney - Australian Financial Review ***