(Bloomberg) -- Signs are strengthening that Australia's two-year property slump is over, with house prices eking out a small gain last month.
Home values rose 0.1% in the combined state and territory capitals in July, CoreLogic Inc. data released Thursday showed. Sydney and Melbourne, the nation's two largest property markets, led the gains, with prices rising 0.2% in each city.
The housing market “may have found a floor in July” Tim Lawless, CoreLogic's head of research said in a statement. “Lower mortgage rates, improved access to credit, a boost in housing market confidence post the federal election and recent tax cuts are the likely primary drivers.”
Restricted housing supply is also helping boost property values as buyers return to the market, Lawless added.
Underpinning signs prices have bottomed, auction clearance rates in Sydney and Melbourne held above 70% last month, compared to below 50% in the depths of the slump.
What Bloomberg's Economists Say
“Further signs of stabilization in Australia's housing market should buttress household spending in 3Q, allowing the Reserve Bank of Australia to preserve its remaining conventional policy ammunition.”
--Tamara Mast Henderson, Economist
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Still, a rapid rebound in prices is unlikely, according to Lawless.
“There is no sign of a V-shaped recovery,” he said. “Policy makers will be keeping a close eye for signs of investor exuberance, or a more rapid acceleration in the recovery trend. If values were to start accelerating rapidly, there could be a renewed round of policy responses aimed at keeping a lid on housing prices.”
Apartments outperformed houses in Sydney and Melbourne last month, even with an “unprecedented” number of unit blocks being built in the two cities, Lawless said.
80,000 Reasons Why Australian Housing Will Struggle
“We may see some dampening of unit values in coming months across those precincts where supply is elevated, as the large number of high-rise off-the-plan apartment sales moves into the re-sale market.”
To contact the reporter on this story: Sybilla Gross in Sydney at sgross61@bloomberg.net
To contact the editors responsible for this story: Edward Johnson at ejohnson28@bloomberg.net, Peter Vercoe
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