For eight consecutive months Melbourne and Sydney house prices have grown, yet market analysts warn that affordability and a potential pandemic are a cause for concern.
Nationally, property values recorded a 1.2 per cent lift in February across the combined capital cities, according to the latest figures from Corelogic's monthly home value index.
Values grew by 1.2 per cent in Melbourne and 1.7 per cent in Sydney over the month of February, following a peak-to-trough decline of 14.9 per cent in Sydney and 11.1 per cent over the duration of the housing downturn.
House prices rebounded by 10.9 per cent in Sydney and 10.7 per cent in Melbourne for the 12 months to February, with median values now at $872,934 and $689,088 respectively.
Despite posting the most rapid recovery trend among the capitals, Sydney housing values remain 3.7 per cent below the 2017 peak.
Price rises in the other capital cities have been less pronounced. Brisbane saw a moderate gain of 0.6 per cent, with Hobart and Canberra both seeing 0.8 per cent growth.
“At the current run rate of growth, the national index is likely to reach a new nominal high over the next two months,” Corelogic head of research Tim Lawless said.
^ Change in dwelling values to 29 February 2020. Source: Corelogic
The strongest value gains continue to be recorded across properties in the upper quartile value range lifting by 1.6 per cent in February compared with 0.4 per cent in value across the lower quartile.
Sydney’s top quartile market has recorded a 13.3 per cent lift in dwelling values over the past twelve months compared with a 5.6 per cent rise across the lower quartile.
Similarly, Melbourne's top quartile is up 14.2 per cent in value over the past year compared with a 7.6 per cent rise in lower quartile values.
Rental growth, which remains generally weak across most markets, were up four tenths of a percent in February, taking the annual change in rental rates to 1.4 per cent.
Corelogic forecast that the market momentum was unlikely to continue as sluggish pace of household income coupled with rising stock levels likely hindering affordability.
The coronavirus outbreak could also be determining factor that impacts the market over coming months, Commonwealth Bank senior economist Gareth Aird warned, pointing to the possible damage to consumer confidence and the flow-on effects this can have to different industries.
“The potential fallout from COVID‑19 on economic activity means that any concerns around briskly rising house prices will be swept aside in near term monetary policy decisions.”
Analysts warned that while demand remained insulated from a downturn in foreign buyers, the economic impact on key export sectors such as education, tourism and commodities is likely to result in weaker economic conditions and lower consumer sentiment.
Capital Economics senior economist Marcel Thieliant said that auction clearance rates, available until 23 February, fell from 77 per cent in December to 69 per cent in February, allowing for seasonal factors.
“That could be a sign that the outbreak of the disease has started to tend demand.
“However, the continued strength in house prices suggests that the Reserve Bank of Australia won’t be as eager to cut rates as many are anticipating.
“We still expect the bank to wait until April before lowering interest rates any further.”