Leading real estate group Ray White now tracks the number of attendees at its auctions as a guide to sentiment. The index bottomed in April and the average number of people at a Ray White auction is now almost 25 per cent higher than a year ago.

Of course lots of challenges remain. Which is why the good news at the front end of the housing cycle will not quickly ripple across sector.

Volumes still low

So far home sellers have not responded to the improvement. Overall the number of new listings added to the market in the first month of spring was 13 per cent lower than a year ago, and well below the spring surge of the previous five years, according to CoreLogic.

Nationally there are more than 102,500 homes on the market, which sounds like a lot but is 13 per cent less than a year ago. In Sydney, the number of homes for sale at the beginning of October was 20 per cent down on a year ago.

For the housing bears, it is evidence of a very thin market, with all the accompanying downside risks.

Perhaps it is just a hiatus. Ray White chairman Brian White notes that record low mortgage rates would have allowed owners to retain non-essential properties but says the past six weeks have seen a “quite dramatic” surge in appraisals – where the seller first talks to an agent. The Reserve Bank, in its Statement on Monetary Policy released last week, noted “tentative signs that turnover may be near its trough”.

Longer term, those dependent on housing turnover, from agents to conveyancers and state governments, should take a hard look at the accompanying chart from CoreLogic.


Turnover at the height of the last boom was less than in the boom of 2002-03. And turnover in each consecutive trough is lower than in the one before. The trend is muddied by the surge in new apartments but turnover has probably dropped from around 7 per cent of total housing stock closer to 5 per cent.

The founder of McGrath Real Estate Agents, John McGrath, says the problem is the high level of stamp duty. A 2017 paper from the Reserve Bank on Housing Market Turnover noted that fewer households owned a home and those that did moved less.

Which is why the NSW Treasury, which reaped $8.76 billion in stamp duty in 2017-18, expects just $6.9 billion in the current financial year.

The improvement in price and sentiment could be expected to flow to lending but housing credit increased by just 3.1 per cent in the year to August, the lowest annual growth on record.

At the same time mortgage approvals have increased, by around 10 per cent, with more data due on Thursday morning.

Further dividend cuts

UBS analyst Jonathan Mott says the difference between the two numbers is timing, with mortgage approvals mostly taking place three to four months before settlement, and because borrowers are choosing to pay down principal rather than cut repayments.

That may not be a good thing for the banks – Mott expects further dividend cuts – but it is a good thing for household indebtedness and housing market resilience.


“We expect monthly credit growth to bottom over the next two months,” he wrote last week. But “any acceleration is likely to be modest.”

Eventually housing sentiment and pricing will flow on to housing construction but not for some time.

Housing approvals continued to fall in August, and have fallen around 25 per cent in the past year. Many builders are still carrying unsold stock; they are struggling to gain finance; they cannot get pre-sales to underpin projects; the sector is shaking from the cladding and apartment building failures; and yet costs generally remain high.

Housing Industry Association chief economist Tim Reardon estimates that after five years of building more homes than needed, the industry will settle to build around 185,000 a year, which is the highest trough on record, but still painful for many in the industry.

“It has slowed down but conditions are conducive for a healthy level of building activity,” he says.


The Reserve Bank also noted the “chance for near-term oversupply, at least in some areas [of Sydney].

“However taking into account the lags in development and planning, there is a risk that an undersupply will emerge in a few years time should new additions to the housing stock be maintained at volumes lower than household formation.”

Speaking at the Financial Review’s Property Summit, the chief executives of both Mirvac and Stockland, Susan Lloyd-Hurwitz and Mark Steinert, predicted that such an undersupply would emerge sooner than many expected.

Robert Harley is the former property editor of The Australian Financial Review. He can be reached at rob@rharley.com.au