Three 0.25 percentage point cuts in 2019 to the Reserve Bank of Australia (RBA) cash rate have pushed average mortgage rates as low as the early 1950’s.
The cash rate is now dangerously close to zero and as home loan rates continue to drop, starting as low as 2.68 per cent, property prices have begun to rise.
The largest month-on-month gain since November 2009
Corelogic recently reported a strong uplift in house prices in their October Home Value Index, with a 1.2 per cent increase in housing prices across the nation.
The highest growth was seen in Sydney and Melbourne, increasing by 1.7 per cent and 2.3 per cent respectively, with the Victorian capital seeing the largest month-on-month gain in the national index since November 2009.
Head of Research at Corelogic, Tim Lawless, posits that the rise in house prices is predominantly due to record low rates and regulation becoming more relaxed.
“It’s becoming increasingly clear that the housing market rebound is gathering pace, both geographically and across the broad valuation cohorts,” he said.
“[This is due to] lower mortgage rates and improved access to credit, as well as an improvement in affordability relative to the market peak several years ago and consistently high demand via population growth.”
However, this monthly rise in house prices must be taken with a grain of salt, as it is not representative of the entire national market, and does not consider the annual figures.
Month-on-month data may not show the full picture
Although Sydney and Melbourne have enjoyed a monthly increase in house prices, both cities have experienced an annual decrease of 2.5 per cent and 1 per cent respectively.
Both Perth and Darwin saw an annual loss in dwelling values of 8.7 per cent and 9.2 per cent respectively, whilst Perth remained the only capital city to record a month-on-month drop of 0.4%.
Further, the national monthly increase of 1.2 per cent, cannot be overshadowed by the annual decrease in prices of 2.4 per cent.
Whilst it is good to be optimistic in terms of a housing market recovery, it is important to ensure that all data is considered.
Some spectators are predicting that housing prices will reach their peak by mid next year, which could lock first home buyers out of the market, and reignite investor interest in the domestic market.
However, it is yet to be seen whether this will occur as when looking at the data year-on-year, dwelling values are still on the decline.