Australian homes fly at auctions in boon for prices By Reuters



Australian homes fly at auctions in boon for prices

By Swati Pandey

SYDNEY, Aug 26 (Reuters) – Australia’s housing market seems to have come out of its doldrums with the hard-hit cities of Sydney and Melbourne set for their third months of gains as sales at auctions pick up remarkably.

An end to the long downturn could be a boon for Australia’s struggling economy given the erosion of housing wealth has undermined consumer confidence and spending power.

It will also prove a blessing for the construction sector, which has seen a severe downturn in new home approvals, particularly for the once red-hot apartment sector.

Data from property consultant CoreLogic out on Monday showed home prices across the capital cities rose 0.7% in August so far, much stronger than July’s 0.1% increase. The gains come after almost two years of relentless losses.

Values in both Sydney and Melbourne have so far risen 1% in August, a major turnaround. Prices in Sydney have been falling since mid-2017 and are still down 7.6% from a year ago.

The improvement in August reflects a revival in clearance rates at property auctions, a popular method of sale in Australia’s major cities, with capital cities just shy of 80% last weekend.

Melbourne was host to 665 auctions last week, returning a preliminary clearance rate of 79.7% and marking the fifth consecutive week of above 70% clearance rate, CoreLogic data showed.

Sydney recorded a preliminary clearance rate of 84.7% across 500 auctions this week, the highest since February 2017.

“Historically such strength has been consistent with house price gains in the order of 15–20% year-on-year,” economists at ANZ wrote in a note.

The pick up will be welcomed by the Reserve Bank of Australia (RBA), which cut interest rates in both June and July to an all-time low of 1% and has pledged to do more if needed.

Analysts generally expect auction volumes, which have remained subdued so far, to start picking up as the market heads into the spring-selling season.

However, most economists expect this upturn to be modest despite the recent surge in activity.

“This reflects our view that tighter credit conditions will act as a constraint,” ANZ economists said. “But there is considerable uncertainty given that interest rates have never been this low.”

While a strong housing market will likely boost Australia’s A$1.9 trillion economy, the returning frothiness could pose a policy challenge for both the RBA and the country’s banking regulator.

Reflecting these concerns at a meeting of global policymakers over the weekend, RBA Governor Philip Lowe said “monetary policy cannot deliver medium-term growth. We risk just pushing up asset prices.”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Source link

We will be happy to hear your thoughts

Leave a reply