High-End Property Market Decline is Starting to Slow
After Australia’s worst property slump in a generation, the latest market data analysis heralds good news: the property market decline is now easing up.
Even better is that according to the latest Property Pulse report from CoreLogic, recovery is going to be fast for the top end of the market.
In a report by Sasha Karen of Smart Property Investment, she details data findings that bode well for property market investors.
Worst Property Market Decline in a Generation
The year has seen the worst so far in housing values in state and territory capitals. In March, housing values dropped 0.7 percent, which means since last year, prices have dropped a total of 8.4 percent. The earliest recorded drop was for 1.1 percent in December of last year.
However, the decline is starting to look up. In April, housing values fell only 0.5 percent. According to Tim Lawless, CoreLogic’s head of research, “We are seeing further evidence that the worst of the housing market conditions are now behind us.”
Other signs that point to the slump ending: auction-clearance rates holding among the middle 50 percent range in major markets and price declines also moderated. Moreover, home-lending also rose in February.
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Top-End of the Market Hurting Now But Not Later
And if the latest analysis of market data is anything to go by, the top end of the market will recover much faster than other markets. Despite the top-end market hurting the most, with property values dropping 10 percent.
As research analyst Cameron Kusher points out in the latest Property Pulse report from CoreLogic, the top 25 percent of the market has the potential to see a correction of its value. This, in comparison with the bottom 25 percent and the middle 50 percent.
“This is a trend that has played out before whereby premium housing values fall the fastest initially but also sees the falls cease earlier than other market segments.
It is still early days, but with the housing market expected to trough in late 2019, the premium housing sector may find a floor first and start to show some level of recovery before the other segments,” he explains.
Basing his analysis on the six-month annualised changed in dwelling values, Mr. Kusher found the although the housing values of the top-end market fell by 11.6 percent, this is the second month in a row where data shows a smallest annual decline since the downward slump that began in December 2018.
Housing Market Predicted to Recover by the End of 2019
The NSW government has announced that the housing market to begin recovery by the end of 2019 when house prices finally stop dipping. This, of course, supports the growth of the state’s stamp duty revenue.
However, the positive prediction does not indicate a boom in the housing market, rather, the expectation is that the growth in property values will rise in line with inflation but still be restrained in the coming years.
While first-time home buyers were able to find for affordable homes during the slump (accounting for 26.5 mortgages taken out since December), the weak land tax revenue growth dictates moderate prices for properties ahead.
The state expects home buying to increase once we recover from the slump and property values to increase.
The period between now and December, when the property market is predicted to recover, is a good time to buy property. According to Stephen Koukoulas, the managing director of Market Economics Pty, “If you’ve got a secure job, a deposit, and financing, then affordability is pretty favorable.”
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It is clear that buying a property in a downturn can be a good decision for the long term.
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