Where the property market is rebounding fastest as interest rates fall

The upper end of the housing market is rebounding fastest as last month’s interest rate cut improves sentiment among potential home buyers.

Buyers of family homes face more competition, less choice and faster price rises compared to buyers in the entry-level apartment market this year.

The Reserve Bank’s widely anticipated cash rate cut to 4.1 per cent last month put a floor under falling property values, sending values in all capital cities except Darwin higher, CoreLogic figures released this week showed, even if this may not be sustained.

But the gains have been uneven and the most expensive quartile – the top 25 per cent of homes – has had a more pronounced rebound than the cheapest 25 per cent of homes.

Sydney’s upper-end home values rose 0.4 per cent last month to about $2.18 million, steeper than the gain of 0.1 per cent for more affordable homes.

It’s a contrast to the three months to February, when Sydney upper-end home values finished 1.1 per cent lower, deeper than the drop of only 0.4 per cent for cheaper properties.

Melbourne’s upper-end home values rebounded 0.5 per cent in February to about $1.3 million, beating the 0.3 per cent gain among the lower end.

It’s a reversal of Melbourne’s performance over the past three months, when the top end of the market dropped 1.6 per cent and cheaper properties fell only 0.7 per cent.

By contrast, Brisbane’s lower quartile has been stronger than its upper quartile (+0.7 per cent compared to -0.2 per cent), and the same in Perth (+0.6 per cent compared to steady).

CoreLogic head of research Tim Lawless was a little surprised by the speed of the rebound as national home values had been in only a temporary and shallow decline, attributing it to a pick-up in sentiment, not a significant improvement in borrowing capacity.

“The top end of the market in Sydney and Melbourne historically has been a lot more sensitive to changes in interest rates, it tends to react more quickly and that’s exactly what we’re seeing this time around,” he said.

“People buying into that premium sector of the marketplace that might have missed out during the growth cycle, they can now buy in at a pretty decent discount, at least to recent highs. Arguably there’s also a bigger benefit to rate cuts if you’re on a higher income.”

But he cautioned that values have risen for only one month and he did not expect a strong growth cycle, given interest rates will probably fall only modestly and affordability will remain stretched.

Among the suburbs in the upper quartile there have been some stark turnarounds, albeit on volatile figures.

In Sydney’s Crows Nest, house values rose 2.1 per cent in the three months to February, compared to a 7 per cent drop in the three months to November.

Cremorne, Balmain East, Cammeray and Mosman rose in the most recent quarter after falling in the previous three months.

House values in Melbourne’s Fitzroy rose 0.4 per cent in the latest quarter after falling 6 per cent in the previous three months, while Fitzroy North fell only 0.3 per cent this quarter after dropping 6.7 per cent in the previous.

Michelle May Buyers Agents principal Michelle May said the upper end of the Sydney market had a surge of demand.

EOI closing Tuesday 1st April at 1pm

22 Church Street, Toorak VIC 3142

4

3

2

View property

“The A-grade properties, there is some competition there. I went through a house in Gladesville guided at $4 million and it was swarming with people,” she said.

Buyers were more active in lower price points too, but benefited from more stock.

“If you have a budget that would only get you an apartment then you will have more choice,” she said. “The agents are telling us they’re struggling and we’re seeing a lot of adjustment to price guides.”

May said interest started building even before the rate cut.

“A lot of people are seeing that interest rates will come down finally and they’ve been holding off for a long time, and people are saying: ‘we need to move’.”

In Melbourne, The Property Bureau buyers’ agent Alastair Mairs said upper-end buyers had quickly returned after the rate cut. However, vendors weren’t keeping up.

“The buyers literally jump on the phone next day and they’re like ‘I want to go buy now’,” he said. “But it takes time for stock to come onto the market.”

Mairs said it was too soon to say if the uptick would be sustained. “It’s a good morale booster if anything else, it’s not likely to reshape the property market yet,” he said.

Interstate investors and home owners looking to upgrade were driving growth in the upper-end of the market, Mairs said.

Investors were still selling apartments and cheaper properties, Mairs said, keeping their prices subdued.