Australia's $6.8 trillion housing market appears to be 'gliding to a soft landing'

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  • ANZ says recent housing market data suggests Australia’s housing market is ‘gliding to a soft landing’
  • It says that after adjusting for seasonality, prices are not actually falling from a national perspective
  • Both ANZ and Macquarie Bank say auction clearance rates also point to a stabilisation in prices in the months ahead

Australia’s $6.8 trillion housing market appears to be “gliding to a soft landing” with prices flat across the country last month, continuing the trend seen since November.

That’s the slightly controversial view from economists at ANZ Bank who say that once seasonal patterns have been eliminated from CoreLogic’s raw data, prices aren’t actually falling at all from a national perspective.

“[Capital city] house prices fell again in original terms in February, down 0.3% and are now just 2.0% higher than a year ago,” the bank says.

“However, February tends to be a soft price month as auction volumes start to pick up following the summer hiatus.

“In seasonally adjusted terms, house prices were flat in nationwide terms, as they have been since November.

“This stabilisation, together with improvement in auction clearance rates, supports our view that the bulk of the slowdown in house price growth is behind us.”

ANZ says this is no better demonstrated than in Sydney where price declines in both nominal and seasonally adjusted terms have been slowing in recent months.

“Sydney has seen a steady reduction in the pace of house price falls in the past six months,” it says, pointing to the chart below.

Source: ANZ Bank

“Sydney prices fell by 0.6% in original terms in February but were down just 0.1% in seasonally adjusted terms.”

This chart from ANZ shows monthly changes in Australian dwelling prices in both nominal and seasonally adjusted terms.

Source: ANZ Bank

And this shows the relationship between auction clearance rates and annual house price growth in Australia going back to 2009.

Source: ANZ Bank

While some describe clearance rates as “rubbery” and prone to manipulation, especially when it suits a particular narrative, it’s clear there’s been a strong relationship between them and house price movements regardless of the position in the cycle.

At the moment, they are pointing to a small acceleration in annual price growth in the months ahead.

And it’s not just ANZ who thinks clearance rates are pointing to a stabilisation in prices in the months ahead.

Macquarie Bank thinks so too.

“Housing prices have broadly flattened out, Macquarie says. “This is consistent with a stabilisation in auction clearance rates through to end-February.”

Macquarie says all the “key timely data sources are now broadly telling the same story”.

“APM data through to January continues to show very modest rises in national dwelling prices in trend terms after seasonal adjustment,” it says.

CoreLogic data through to February suggest that prices have been broadly unchanged in recent months after seasonal adjustment.”

Macquarie is forecasting national house price growth to “sit in the low single digits” on average over the next few years.

“Whether housing prices are flat this year, or rise or fall a few percentage points is essentially the same outcome in our view,” it says.

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