What’s going to happen to property prices next week? Louis Christopher

The ABS will be reporting on the June Quarter house prices next Tuesday – the same day as the RBA’s interest rate decision.

I won’t reveal my tip on what they will do for the cash rate, but I will tell you what I think the Australian Bureau of Statistics (ABS) is going to report – which will be an increase in house prices of about 1.4% to 1.9% with the drivers of this growth being Sydney, Perth and possibly Melbourne.
For the six months to June, asking prices rose by 4.9% in Sydney.

And I think that is indeed a fair reflection of actual capital growth that has occurred.

Yes, Sydney house prices have risen by at least four per cent in just six months.

So far this year, the ABS has reported zero growth for the Sydney house prices.  That is based on their preliminary March quarter result.

Fundamentally we know that is not the case. There is just way too much evidence from every corner that house prices have risen this year.

So watch this space!

For the revised ABS March quarter, Sydney and subsequently national capital city result will be revised higher.

Remember our in-length discussion recently about data lag?

This is why the ABS needs to do revisions for its results. And the revision is likely to be strong.

The data would suggest going from 0% all the way up to 3%.

But I doubt the good people at the ABS would put through such a great revision so I suspect it will be more in line with APM’s revised March Quarter result of 1.5%.

That would then leave room for a very large June quarter result, in which case the ABS could report another rise for June in the range of 2-3% and therefore leave the door open to a rather large national capital city result of 1.4% to 1.9%. Remember, my opinion is Sydney has risen by at least 4% for the six months to June.

My evidence is our asking price index rising by 4.9% and the APM series rising by 4.2% over the same period.

Now in all this, Sydney’s data affects about 30% of the national result (hence why I am devoting much of the discussion on Sydney in this particular instance)

Remember that the ABS came out and reported just a 0.1% increase for March for the capital city average. So if the Sydney result does get revised upwards in March, the national result will also be revised higher to about 1% for that quarter.

As for Perth, we were still recording a very strong trend upwards to 30 June so I believe the ABS will likely report a solid result yet again in the vicinity of about 1.5% to 2.5% for that city. But this will likely be the last strong result coming out of that city for some time.

And Melbourne?

Remember, this was the city where the data lags are at their worst. No wonder ALL house price reporters are struggling in getting their results on the mark for this city.

Our asking prices would suggest the ABS will report a quarter price rise here of about 2%. But, really, it could be any number for Melbourne.”

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Louis Christopher

About

Louis is recognised as one of Australia’s most respected and impartial research property analyst. He has extensive knowledge and experience of property and is regularly quoted in the media on his insights and is director of SQM Research.
Visit www.SQMResearch.com.au


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