House prices surged 1.7% across Australia in November, the rapidly reviving market recording the biggest monthly rise since 2003, according new figures.
The value of homes rose for the fifth month in a row driven by Sydney and Melbourne, where prices were up 2.7% and 2.2% respectively last month, the research firm CoreLogic said on Monday.
The rise was also felt in every other capital city except Darwin in what CoreLogic described as “a broadening in the geographic scope of this upswing”.
However, the rise in house prices came ahead of more sobering data on Monday showing an 8% drop in approvals for new home construction, a fall in company profits, continuing slow growth in wages and a fewer jobs being advertised.
The improving housing picture shown by CoreLogic’s monthly home value index sent the market into positive annual growth territory for the first time since April 2018, with values 0.1% higher over the past 12 months.
Perth saw its first monthly rise for 12 months with prices up 0.4%, while Brisbane edged up 0.8%, Adelaide 0.5%, Hobart 2.3% and Canberra 1.6%. The combined national rise was 1.7%.
Tim Lawless, head of CoreLogic Research, said a number of different factors had led to the turnaround in the index after it hit a trough in June, including three rate cuts by the Reserve Bank, a loosening of lending standards by the regulator, and the Coalition’s federal election win in May ending uncertainty about tax policy.
But he said there was still a lack of supply, which meant more buyers were chasing too few homes as they raced to make a purchase before prices went too high again.
“We’re seeing advertised stock levels persistently low, creating a sense of urgency in the market as buyer demand picks up,” he said.
The best-performing area in Australia in November was Melbourne’s inner east, where prices rose 8%, followed by the city’s inner region at 5% and Sydney’s Baulkham Hills and Hawkesbury at 4.3% and Sydney’s inner west at 4.2%.
A very busy sales day on Saturday also gave prices in the two big cities a traditional late spring season boost.
In Sydney there were 1,131 auctions in the past week, with preliminary results showing a clearance rate of 84.7%, although 353 were unreported, CoreLogic said on Monday. In Melbourne 1,497 properties were listed, producing a clearance rate of 78.3%, with 469 not reported. In Brisbane the rate was 54.8%, Adelaide 78.7%, Perth 50%, Canberra 71.7% and Tasmania 80%.
Lawless cautioned that the key test for the market would come when more properties came on to the market in the new year and autumn.
“The Australian housing market is now five months into an unexpected period of rapid recovery. The question is, how long can such a high pace of capital gains be sustained?” he said.
Annualised growth suggested the national index was tracking at 15.3% for the next 12 months while Sydney and Melbourne dwellings were on course for growth in the mid-20% range.
“Considering wages and household income growth remains low, economic conditions are losing momentum and housing affordability is once again worsening, there are likely to be some headwinds in maintaining such a fast recovery,” Lawless said.
His comments foreshadowed data released by the Australian Bureau of Statistics on Monday which showed home approvals dropped by a much greater than expected 8% in October – a fall of 23.6% on an annual basis. Although the ongoing fall in new starts may add to supply constraints and keep upward pressure on home prices, the fall in construction is bad news for the wider economy and points to mean higher unemployment in months to come.
In more gloomy data, business indicators released by the ABS showed that company profits fell 0.8% in the third quarter ending in September, wages grew a little less than expected at 1% and company inventories fell 0.4%. ANZ job advertisements fell by 1.7% in November and are down 12.6% for the year.
The numbers will give added interest to the release of third quarter economic growth figures on Wednesday. The forecast among economists is for growth of 0.6%. However, Capital Economics expects it to be 0.4%, firming up its belief that the RBA will hold rates at its monthly meeting on Tuesday but will cut the cash rate to 0.5% in February.