Australia’s housing upturn gains momentum

Australia’s housing upturn gains momentum

Posted on Friday, October 04 2013 at 3:39 PM

The property market’s upswing is gaining momentum, with a surge in auction activity and signs of a quickening in price growth, according to Westpac senior economist Matthew Hassan.

National auction
clearance rates over the September quarter are now at 70 per cent, while Sydney
has been the standout performer, with auction clearance rates at a record high
of 78 per cent.

“That’s coming
despite a strong rise in the number of auctions, up about 30 per cent over
three months,” Hassan says.

“In the past,
auction clearance rates at these levels have presaged strong growth in prices
– double-digit annual growth rates in the case of Sydney. And indeed, some
of the more timely monthly measures suggest there has been a significant
quickening in price growth. RP Data-Rismark’s monthly home price index reported
a 1.6 per cent rise in September, following gains of 0.5 per cent, 1.5 per cent
and two per cent over the previous three months.”

However, the
pick-up has been more uneven in Melbourne. Perth has been strong but looks like
waning, while the market has been very weak in Brisbane and Adelaide.

Hassan says this
means prices nationally have only just regained their previous peak and so some
commentators warning of a housing bubble should be kept in perspective.

“If there was a
bubble in house prices at the time, it would also have been present in 2007-08
and would have been very unlikely to have survived the ‘stress test’ of the
GFC,” Hassan says.

“Given where
prices are now, the same broad argument would seem to apply. Moreover, while
activity has strengthened over the last three months, current conditions are
still a world away from the booms that have seen overheating in the past. In
2003 for example, the value of housing finance approvals rose 37 per cent per
annum for three years and prices increased 63 per cent.”

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