Australia | Jun 16 2010
By Rudi Filapek-Vandyck
Investors interested in the outlook for residential property prices throughout Australia should keep a close eye on auction rates in the weeks ahead, suggests Westpac economist Matthew Hassan. He points out the minutes to the June 1 RBA board meeting also included a note of lower auction clearance rates being regarded a sign of easing conditions in the housing market.
Hassan appears to be of the view that overall house prices are due for a breather in the months ahead, especially in Melbourne.
He notes rate rises and sharply lower first home buyer demand have already impacted heavily on housing finance approvals, which are down 28% from their September high. Historically, notes Hassan, swings in finance approvals have usually been a good gauge of demand and tend to impact with a lag of about six months.
In addition, the latest auction clearance rates suggest there has been a significant softening in market activity in May-June. Westpac's estimates adjusting for regular seasonal fluctuations suggest clearance rates fell about 5-6ppts in May with partial data for the first two weeks of June pointing to an even sharper 10ppt fall in Melbourne.
If correct, the projected cooling down would come after some hefty gains recorded over the six months to May. Hassan notes house price growth over the six months to May was still running at an annualised pace of 11.2% (12.8% for units), this despite a rise in the standard variable mortgage rate of 1.6ppts since September last year.
According to data provider Residex, house prices still rose by 0.6% nationally in May. This was down on the robust 1.6% rise in April and 1.2% gain in March, but still lifted the three month growth rate to 3.5%. This compares with a 1.4% gain recorded in Q1.
Some capital city market segments recorded small price declines in May (Adelaide houses -0.4%; Perth units -1.1%). There was also a notably abrupt cooling in Melbourne prices.
