House price recovery stalls in October
Home prices fell in October after four months of gains, dashing hopes of a quick housing market recovery aided by lower interest rates.
Capital city homes prices fell 1 per cent in October, following a 1.4 per cent increase in September, according to the RP Data Rismark, after the Reserve Bank cut interest rates through 2012. Home prices fell 0.9 per cent in Sydney and 1.1 per cent in Brisbane, RP Data said.
‘‘Despite the cash rate being only 25 basis points higher than the emergency lows seen in 2009, we are yet to see a real improvement in consumer confidence or housing market transaction volumes,’’ said RP Data’s research director Tim Lawless.
Home prices fell 0.9 per cent in Brisbane but rose 0.4 per cent in Perth, RP Data said. Outside of capital cities home prices sank 0.6 per cent in the month. October’s fall occurs during the spring selling season, traditionally a time of renewed activity in the sector.
The RBA has cut 150 basis points from the cash rate since November 2011 in an effort to stimulate demand with lenders passing along only about 115 basis points. However, a robust recovery in the housing sector has not followed.
Clearance rates firm
Whether the October decline is a blip on the path to a recovering market, or a sign of further weakness is yet to be seen.
Auction clearance rates, have firmed in recent weeks, in a sign that buyers are wading into the market, amid low rates and a stablising consumer sentiment. Official Australian Bureau of Statistics data has shown a moderate strengthening in home loans. Home loans rose 1.8 per cent in August, following a 0.7 per cent drop in July.
But other signs of weakness persist, with the Housing Industry Association’s new home sales report yesterday posting its third consecutive monthly decline in September, sinking by 3.7 per cent.
“Whether the October decline is a blip on the path to a recovering market, or a sign of further weakness is yet to be seen,’’ said Mr Lawless.
A number of economists say a robust recovery is unlikely because of renewed household caution, worries about job security, and ongoing poor affordability - the median capital city home price was $460,000 in October according to RP Data.
‘‘Other indicators are suggesting the market has gathered some strength, with auction clearance rates holding firm around the 60 per cent mark across the two major auction markets.”
In Melbourne, clearance rate rose to 64 per cent from 60 per cent, according to the Real Estate Institute of Victoria. In Sydney, they rose to 67.9 per cent from 61.7 per cent in the same time.