It is too early to be definitive but there are a number of indicators that the property market that was slumping on the way into the Federal Election is in the early stages of a rapid turnaround.
Since the surprise election result which saw Labor’s controversial negative gearing and capital gains tax policies disappear from view, there have been some definite signs that interest in real estate has returned.
Home loan applications on the rise
One is the admission by Commonwealth Bank chief executive Matt Comyn that the bank’s incoming home loan applications jumped to a 10-month high in the week following the Coalition’s surprise election win.
While he didn’t go as far as saying the boom in applications signalled a turn in the market, Mr Comyn did say that greater certainty in housing policies combined with cuts to interest rates and taxes could help to “stabilise” the property market.
“I think particularly the market is quite rightly…interested in property. And we did have the strongest week in applications that we’ve seen in more than six months.”
“It did feel, certainly from a demand perspective, that there was quite a big shift in sentiment,” Mr Comyn said at a Trans-Tasman Business Circle lunch in Sydney.
Mortgage brokers have also reported some sign of a recovery in loan applications following the election.
Bounce back in prices expected by July
Macquarie Bank’s equities strategy team said historical data showed that there can be a large bounce-back after a peak decline in property prices and that could come by July.
“Australia’s house price growth reached its worst on an annualised basis in January. Prices have continued to fall since then, but the rate of decline has slowed,” the bank found.
“If you look at prior cycles, an increase in house prices occurred five to seven months after the trough in the annualised growth rate. Using the average of six months, prices could rise by July.”
Macquarie said in every Australian house price cycle since 1989, price growth followed within seven months after the monthly annualised price decline bottomed.
Macquarie’s prediction also concluded that looming interest rate cuts, relaxed lending conditions and the recent election result would also play a part in a market recovery.
“With the surprise Coalition election win, APRA’s policy change and an expected June RBA rate cut, we are more confident Australian house prices could rise within months,” said the Macquarie research.
“This should flow through to better growth in housing finance and building approvals.”
Return of first home buyers positive for prices
AMP Capital chief economist Shane Oliver also pointed to financial help for first home owners as a factor.
Dr Oliver also pointed to the removal of the threat to property tax concessions and lower interest rates and easier finance as reasons for a property market recovery coming earlier than had been expected.
“We now expect capital city average house prices to have a top to bottom fall of 12% — of which they have already done 10% — rather than 15% and to bottom later this year.”
Sydney house prices have fallen around 15% from their peak while Melbourne’s market has fallen about 11% from the top.