Vendors in strong position

Spring is looking to be a good season for vendors this year, with new data showing a strong gain in home values.

Cotality’s national Home Value Index rose 0.7 per cent in August, the biggest monthly gain since May last year. The result pushed the annual change higher for the second month in a row, to 4.1 per cent.

According to Cotality Australia’s research director Tim Lawless, the growth cycle has been gradually building momentum since the February rate cut, with buyer demand spurred by a lift in borrowing capacity, real wages growth, rising confidence and what is likely to be a growing sense of urgency as advertised stock levels remain tight.

“Once again we are seeing a clear mismatch between available supply and demonstrated demand placing upwards pressure on housing values”, Lawless said.

“The annual trend in estimated home sales is up two percent on last year and tracking almost 4 per cent above the previous five-year average. At the same time, advertised supply levels remain about 20 per cent below average for this time of the year.”

Lawless suggests vendors are in a strong position as we head into spring.

“Auction clearance rates rose to 70 per cent in late August, the highest since February last year, and competition amongst sellers is relatively mild amid such low advertised stock levels”, he noted.

“We are starting to see the usual start of spring upswing in new listings coming to market, but from a low base.

“A pick up in the flow of stock coming to market through spring will be good news for buyers who generally have limited choice at the moment”, Lawless added.

While housing values are rising across most regions, the pace of growth remains modest relative to recent upswings. During the pandemic, the monthly change in the national index peaked at 3.1 per cent in March 2021, and the upswing commencing in early 2023 climbed quite rapidly, reaching a 1.3 per cent high in May 2023.

“I would be surprised if we saw the monthly rate of change in the national HVI getting anywhere near these earlier cyclical peaks, given how stretched housing affordability has become”, Lawless suggested, noting that what is more likely is that home values will rise at a more sustainable pace, with demand dampened by affordability constraints, more normal rates of population growth and cautious lending policy.

“While interest rates are falling, the cash rate is still 350 basis points higher than the 0.1 per cent low that underpinned growth in the pandemic”, he concluded.

The growth trend remains geographically broad-based with almost every region recording a rise in values over the month. Tasmania remains the exception, with Hobart values down 0.2 per cent over the month.

The mid-sized capitals are once again leading the growth trend, with Brisbane (up 1.2 per cent) and Perth (1.1 per cent) recording the highest monthly gains. Adelaide wasn’t far behind with a 0.9 per cent lift in values.

Darwin has also recorded a solid gain, with a 1.0 per cent rise in August, taking values 10.8 per cent higher through the first eight months of the year, by far the highest year-to-date gain across the capital cities.