Sydney housing values had not increased since July 2017 while Melbourne’s had not risen since November 2017

This article is more than 1 year old

This article is more than 1 year old

Property prices in Sydney and Melbourne are up for the first time since 2017, analysts attributing the trend to lower mortgage rates and improved sentiment.

Dwelling values in Australia’s two most populous cities rose 0.1% and 0.2% respectively, according to data released Monday by property analytics firm CoreLogic.

It was the first monthly increase in Sydney values since the market peak in July 2017 while Melbourne dwelling values had not risen since the market there moved through a peak in November 2017.

CoreLogic head of research Tim Lawless said the May federal election and a 25 basis point cut to the Reserve Bank cash rate in early June may have played a role, but suggested that improving conditions through to mid-May were largely “organic”.

“The improvement in housing market conditions over the first five months of the year has largely been organic, however since mid-May there has been a raft of announcements that should provide a further positive flow through to housing demand,” Lawless said.

“Stability within the federal government, along with the removal of uncertainty surrounding changes to negative gearing and capital gains tax discounts, has brought about increased certainty and boosted confidence in the housing market.”

A 0.2% fall in national dwelling values was the smallest month-on-month decline in the national series since March 2018 and largely down to the newfound resilience in the NSW and Victorian capitals.

“Potentially we are seeing the first signs that the top end of Sydney and Melbourne’s housing markets are leading the recovery trend,” Lawless said.

Macro-economic research company Capital Economics, however, predicted the housing downturn would continue to be an impediment to economic growth.

“We now forecast that aggressive easing by the RBA will mean that prices will reach their trough around the end of this year before rising a little in 2020,” the company said in a statement.

“Even so, given high household debt, we think consumption growth may remain subdued for some time. What’s more, recent building approvals are consistent with dwellings investment declining sharply over the next year. We therefore expect that the housing downturn will remain a drag on economic growth throughout 2019 and 2020.”

Since peaking in 2017, Sydney’s top quartile values are down 17.1% and Melbourne’s top quartile is down 15.8%, with both cities recording much larger falls across the top quartile relative to the broader market.

The only other regions to record a rise in housing values over the month were Hobart with a 0.2% rise, as well as a 0.1% lift for regional South Australia and a 0.2% lift for the Northern Territory.

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Canberra and Darwin property prices fell by 0.9% in June while Perth prices dropped by 0.7% to be down by 9.1% for the past 12 months.

Across the regional markets, values were 0.4% lower in June to be down 3.1% for the financial year.

The best performing regional markets over the past 12 months have been in Tasmania, however, despite the strong annual performance, the momentum is slowing across both Hobart and the regional areas of the state.

At the weakest end of the property market spectrum, the broader outback regions of Queensland, Western Australia and South Australia have recorded some of the worst housing market conditions due largely to the extreme weather conditions such as the recent droughts and floods.

On a quarterly basis, every capital city housing market has recorded a drop in value, highlighting the broad geographic scope of this housing market downturn.

The largest falls over the past three months were recorded in Darwin (-3.6%) and Perth (-2.1%) where the weaker trend has persisted since mid-2014.

Although rental growth is generally sluggish, most cities are seeing rental rates rising faster (or falling slower) relative to dwelling values.