Even within the midst of a recession the Australian housing market continues alongside its merry means | Greg Jericho | Enterprise


The Australian housing market is a peculiar beast. You’d suppose that within the midst of a worldwide pandemic that has seen Australia’s economic system crash by 7%, and round one in 5 Australians both unemployed or wanting extra hours that home costs would possibly take a tumble. However no.

This week the bureau of statistics launched the latest residential property price index which exhibits that throughout the nation’s capital cities, property costs fell 1.eight% within the June quarter. And certain, that may sound like loads – maybe even that there’s a main market correction. However it isn’t even the largest one quarter fall up to now two years, not to mention something just like the report falls we’ve got seen in different components of the economic system.

And regardless of that one quarter fall, residential property costs stay nicely above what they have been a yr in the past:


Each capital metropolis besides Canberra noticed costs fall in June – with Sydney and Melbourne the largest falls. And but in each capital metropolis besides Darwin costs are above what they have been a yr in the past – with Sydney and Melbourne having the largest rises:


Now certain, you would possibly suppose that these figures have a look at the previous and are thus not reflective of what’s taking place now. Definitely clearance rates at auctions in Sydney are down on the place they have been final yr, and Melbourne is at present virtually an auction-free zone.

However housing finance progress suggests there’s little “cooling” about to happen.

Final week the ABS revealed there was a robust rebound in July of mortgage approvals – with the worth of owner-occupier housing loans being 18.5% above what it was in July final yr:


A sizeable portion of that progress is because of beneficial first-home purchaser packages in Victoria and Western Australia, however even when they’re excluded, there’s a clear enhance in loans:


That is vital as a result of there’s a very robust relationship between housing mortgage progress and what home costs will do within the subsequent six months:


Even in Melbourne this counsel that we’re not prone to see home costs fall beneath what they have been a yr earlier any time quickly:


And but this all comes at a time when some commentators an analysts are worrying a couple of “September credit cliff” that would happen when the round 11% of mortgage holders who’ve deferred their loans for six months must begin repaying them on the finish of this month.

That might be an financial calamity – given it should coincide with the federal government’s resolution to scale back the jobseeker bonus cost – however it’s unlikely, principally as a result of it isn’t within the banks’ curiosity for that to occur.

In July, Apra wrote to banks advising them that previous to the top of September banks “might proceed to defer residence mortgage repayments “till the sooner of an mixture interval of deferral totalling ten months; or 31 March 2021”.

Furthermore the minutes of the newest Reserve Financial institution board assembly didn’t elevate any concern concerning the situation.

And so it appears probably the housing market will proceed to stay buoyant. The principle purpose for that is the extremely low cost mortgage charges at present out there.

The usual variable price is now four.52%, however nobody pays that. Even the common low cost price of three.65% is greater than most are paying:


The RBA estimates that the common price of all financial institution owner-occupier loans taken out in June was simply 2.68% – down from three.52% a yr in the past. (As ever, ring your bank and negotiate a better mortgage rate.)

In case you are nonetheless lucky sufficient to have a job, that makes for a reasonably tasty mortgage price – it means somebody with a $500,000 mortgage will pay round $230 much less per 30 days than they might have a yr in the past.

A couple of months ago I used to be anxious that the worth of residence loans being taken out was rising whereas the variety of mortgages was falling; however now even the numbers are rising:


And so even within the midst of the deepest recession in almost 100 years the housing market continues alongside its merry means.

That’s in fact good for the economic system as an entire – a housing crash won’t do anybody any good. However these hoping an financial recession would possibly see some moderation in affordability will probably need to preserve ready.