The so-called market ‘downturn’ we saw over the last few months was a blink-and-you-miss-it affair. Home prices are once again on the up. We unpack what’s happening – and why now could be a good time to buy.
Crikey, that didn’t last long.
In early January, CoreLogic declared Australia’s housing market had entered a downturn after property prices dropped -0.01% in November and -0.1% in December (followed by a -0.03% dip in January).
Fast forward to early March – just two months later – and CoreLogic reports “Housing downturn reverses in February”.
Have we just witnessed the shortest downturn on record? Or was it just a minor blip on the radar?
Here’s a closer look at what’s happening with home prices.
Lower rates have fueled buyer confidence. When CoreLogic stated in January that “the growth phase of the (property) cycle has come to
an end”, it had plenty of evidence to back up the claim.
Homes were taking longer to sell. Listings were up across the country, and buyer demand was stalling.
Events in February changed all this.
Expectations of a Reserve Bank of Australia (RBA) rate cut grew stronger, boosting buyer confidence.
Auction clearance rates improved, and the flow of freshly advertised ‘for sale’ listings slowed.
The much-anticipated 0.25% RBA rate cut, when it finally arrived, brought everything together to see home prices rise 0.3% in February, reversing the falls of the previous three months.
Will home prices keep rising? According to REA Group, February’s rate cut not only lifted buyer sentiment, it also delivered an uptick in borrowing power and improved affordability.
And after a long period of higher rates, REA says buyers who held off purchasing are now re-entering the market.
Could this see home values continue to rise?
A lot hinges on interest rates.
The RBA has made it clear it’s in no great hurry to call further rate cuts, though that doesn’t mean it won’t happen.
NAB is predicting four more rate cuts over the next 12 months.
Westpac says rates could drop an additional 0.75% this year, and expects home prices to increase by 3% in 2025, and by 7% next year.
AMP says Australia’s “chronic shortage of homes” could see home prices jump 3% this year.
Why now could be a good time to buy FOMO (fear of missing out) should never be the main motivator for buying a home. After all, it’s probably the biggest investment you’ll ever make.
But as the last few months have shown, market downturns can be done and dusted in a matter of weeks, and sitting on the sidelines waiting for prices to fall can just mean paying more down the track.
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