7 signs Australia's housing boom is over

The seven signs Australia's housing boom is over

By Tim Lawless | Property Observer – 12 hours ago

There are mounting signs that Australia’s housing market may be moving through the peak of the cycle, however it is important to remember that strong housing market conditions have been evident in Sydney and Melbourne while every other capital city has shown relatively sedate conditions.

Also read: Aussie house prices to drop

CoreLogic’s September indices results showed that Sydney dwellings values remained flat over the month and other data flows are also pointing to a moderation in growth conditions across Australia’s largest city and the broader housing market.

Also read: Australia's housing boom is over

THE FACTORS THAT HINTING AT A MARKET PEAK INCLUDE:

Auction results have been consistently moderating, especially in Sydney where clearance rates have been sub 70% consistently over the past five weeks

Listing numbers are rising, which is normal during the Spring season, but a higher than normal number of homes are being added to the market in Sydney which is contributing to higher stock levels than a year ago and rising months of supply.

Investment demand is moderating due to both tougher lending from the banks as well as market disincentives such as low yields, affordability constraints and a mature growth cycle.

Mortgage related activity has fallen across CoreLogic platforms. Although activity remains higher than a year ago, mortgage related events are down from heights seen over the first half of 2015 and aren’t seeing their normal spring bounce.

Rents are hardly moving which has pushed rental yields to historic lows in Sydney and Melbourne. Paying a landlord is likely becoming more affordable than paying a mortgage despite the low interest rate setting.

The cost of debt is rising outside of any upwards movement in the cash rate. Higher debt servicing costs can only act as a disincentive.

Supply levels are set to rise further as the pipeline of approvals moves through the commencement phase and onto completed housing product. Inner city apartment markets are most exposed to higher supply.

Also read: RBA says too much focus on Sydney property

While conditions may be starting to slowdown, particularly in Sydney, the coming months will provide further clarity about housing market conditions.

Picking the turning point in the housing market is easy in retrospect, but as the market evolves it can be hard to separate short term movements from the beginnings of a longer term trend.

The coming months of data flows through to the end of the year will provide a great deal more perspective.

Tim Lawless is head of the CoreLogic RP Data research and analytics team and can be contacted here.

https://au.finance.yahoo.com/news/the-seven-signs-australia-s-housing-boom-is-over-013154039.html

The start of the end. The next few months should prove very interesting...