- If national prices continue on their current trajectory, 2020 will see the fastest market recovery in Australian history, according to property research group CoreLogic.
- The property downturn saw an 8.4% correction in values. In just seven months, this fall has largely been made up, with prices on track to fully recover in the next three months.
- Head of residential research Eliza Owen attributed much of the recovery to home buyers who have rushed into the market to take advantage of increased affordability and low interest rates.
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It’s one of nature’s greatest phenomenons: the stampede of desperate homebuyers into Australia’s property market.
National prices may have nosedived off their 2017 peaks, but are now bouncing at a blistering rate, kickstarting what research group CoreLogic is calling “the fastest market recovery on record” given the depth of the downturn.
“Since national dwelling values bottomed out 8.4% below their peak at June 2019, the Australian dwelling market has quickly recovered 6.7%,” head of residential research Eliza Owen said this week in a Corelogic note.
“If growth rates continue at the January trajectory – of 0.9% value growth per month – Australia’s dwelling market would make a full nominal recovery by April, marking a 10 month recovery period since values found a floor last June,” Owen said.
While that trajectory is hardly guaranteed, it would mark an extraordinary turnaround if it did come to pass. The closest comparable bounce was registered more than a decade ago in the depths of the global financial crisis (GFC). As panic gripped overseas markets, property values in countries like the US, Spain and Ireland imploded. While Australia got off relatively lightly, prices dropped sharply over the course of 11 months before soaring back into positive territory.
Compare that to this downturn which saw prices decline for the better part of two years before jolting back following the May federal election and consecutive rate cuts by the RBA.
“Most recovery periods match the length of time it takes to go from peak to trough. However, in 2020, the market recovery could be half the length of the downswing,” Owen said.
Owen said unlike in other instances, it’s actually home buyers supporting price growth, with “housing finance data from the ABS shows much more activity from first homebuyers, upgraders, and down-sizers in this recovery.”
Those groups have dominated lending, with owner-occupiers representing almost three-quarters of all new loans in the last seven months, excluding refinancing. For reference, leading up to the market’s peak in 2017, these groups made up less than 60% of new loans, albeit over a much longer time frame.
While Owen acknowledges investors could be enticed back into the fold this year, so far recovery has rested firmly on the shoulders of homebuyers unable to resist their narrow buying window, characterised by low-interest and falling prices.
“Reduced mortgage rates and the decline of investor participation may have further enabled first home buyers in the past 7 months,” Owen said. “Millennial movement through the typical first homebuyer aged cohort is likely to have increased owner-occupier demand over the past ten years or so.”
But with price records tipped to be broken in the coming months as wages stagnate, the real question is how much longer can homebuyers really afford to jump in?