SYDNEY, Aug 1 (Reuters) - Australian home prices stabilised in July as the hard-hit markets of Sydney and Melbourne enjoyed a second straight month of gains and sales at auctions picked up markedly, an early sign that rate cuts were feeding through.
An end to the long downturn could be a lifesaver for the struggling economy given the erosion of housing wealth had undermined consumer confidence and spending power.
Australia’s housing stock is valued at A$6.6 trillion ($4.52 trillion), or almost four times the country’s annual gross domestic product.
Data from property consultant CoreLogic out on Thursday showed home prices across the capital cities rose 0.1% last month, breaking almost two years of relentless losses.
Prices outside the major cities still dipped slightly in July, so that nationally values were unchanged.
Values in both Sydney and Melbourne edged up 0.2% in July, a major turnaround if sustained. Prices in Sydney have been falling since mid-2017 and are down around 15% from their peaks.
The improvement reflected a revival in clearance rates at property auctions, a popular method of sale in Australia’s major cities, with Sydney topping 70% in recent weeks.
“The stabilisation in housing values is becoming more broadly based, with five of the eight capital cities recording a subtle rise in values over the month,” said CoreLogic head of research Tim Lawless.
The pick up will be a relief to the Reserve Bank of Australia (RBA), which cut interest rates in both June and July taking them to an all-time low of just 1%.
Australia’s banking watchdog has also loosened rules on home loans, which effectively allowed prospective buyers to borrow more, a timely move given growth in housing credit hit record lows in June. “Sentiment based measures suggest volumes will pick up in coming months,” said Matthew Hassan, a senior economist at Westpac. Westpac’s own survey of consumers pointed to a likely recovery in sales over the second half of the year.
“Importantly, the next few weeks will also start to see some seasonal shifts,” he added. “While Spring doesn’t officially start until September 1, auction markets typically see a lift in clearance rates from around August.”
A recovery cannot come soon enough for the construction sector, which has seen a severe downturn in new home approvals, particularly for the once red-hot apartment sector.
A profit warning from cement maker Adelaide Brighton Ltd on Wednesday highlighted the dire straits of demand and hammered shares across the industry.
$1 = 1.4603 Australian dollars Reporting by Wayne Cole; Editing by Sam Holmes