Auction clearance rates are rising, prices are stabilising and lending is loosening, but property analysts aren’t popping the champagne quite yet.
Weak wages growth and poor unemployment figures suggest the economy won’t pick up any time soon – and analysts say that means the property downturn still has a fair way to go.
Suburbanite director Anna Porter told The New Daily that a lack of mortgagee-in-possession sales suggested the market hadn’t yet reached its bottom – despite CoreLogic revealing on Monday that property prices in Sydney and Melbourne had increased for the first time since the downturn began.
“What I have seen in cycles gone by is a number of mortgagee-in-possession sales hit the market prior to reaching the bottom – and we just haven’t seen that in any real volume yet,” she said.
“We haven’t hit the bottom until we see that coming through.”
Ms Porter said households that took on increasingly large mortgages before the market’s 2017 peak would now be experiencing financial hardship in a struggling economy.
“When the economy softens, and you couple that with a decline in the property market, that is a trigger for mortgagee in possession,” she said.
“And that has further downward pressure on market values.”
Ms Porter said that low levels of distressed sales to date suggested more were likely on the way, which meant it was too early to declare an end to the downturns in Sydney and Melbourne.
“[That] a lot of people are struggling to settle on off-the-plan properties is another indicator that there is more financial distress sitting in the mortgage sector,” she said.
“Once we see a glut of distressed sales come through, then we will know the market will have hit its lowest point.”
Ms Porter’s comments come after CoreLogic’s Hedonic Home Value Index on Monday revealed that values in June increased by 0.07 per cent in Sydney, 0.24 per cent in Melbourne and 0.18 per cent in Hobart, but fell in all other capitals.
CoreLogic senior research analyst Cameron Kusher argued that distressed sales were unlikely to have as big an impact as Ms Porter suggested. But he agreed that the latest figures didn’t justify claims that markets in Sydney and Melbourne had reached their trough.
“I’m not ready to say the market has bottomed just because one month has been positive,” Mr Kusher told The New Daily.
“I agree that we could just as easily see a slight fall in both of these figures over the next couple of months.
“But if you look at the trends, I think we can certainly say that the largest falls are actually now behind the market.”
Mr Kusher said price falls still had a way to go in cities outside Sydney and Melbourne – as their downturns started later – and lower demand for housing in these cities meant longer recovery times.
“The big test will be when we get to spring, when more new listings come on to the market,” he said, before adding that tight lending conditions could dampen the market recovery.
“Even if APRA does make changes [to the serviceability requirements], it’s still going to be a lot tougher to get a mortgage than it has been in the past.”
And the broader economic slowdown could affect the recovery, too, Mr Kusher said.
“We’ve got weak wage growth, we’ve got inflation continuing to underperform, and then other things like the trade war going on,” Mr Kusher said.
“They can all have an impact on the [property] market.”