What's ahead for our property markets?
How much longer will this downturn last?
Maybe not that long after all!
You see...the ANZ Bank have created a leading index - one that looks forward, rather than the typical lagging indicators that tell us what has happened
The ANZ Housing Search Index look at the volume of property, mortgage, auction clearance etc Google searches and have found a strong correlation of what happens in our real estate markets 3 months later.
It has accurately signalled a turn in the market during previous periods of house price weakness.
More interest in property = more searches = stronger markets.
And not surpassingly, less interest in property = fewer searches = weaker markets.
Well, recently ANZ have updated their Search Index for September 2018.
The index suggests that weakness in dwelling prices is passed its peak; and some stabilisation towards the end of this year is possible (Figure 1 and 2).
Figure 1. ANZ Housing Search Index signals the trough in dwelling prices is close.
Figure 2. …and some stabilisation into year-end is possible
ANZ look at a number of indicators when they consider the outlook for house prices.
Those that have a reasonable track record in signalling turning points in the direction of house prices include the housing credit impulse and auction clearance rates, in addition to the ANZ Search Index.
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At present these are sending a mixed signal about the outlook.
The housing credit impulse, effectively the change in the change in credit growth, has stabilised and may be turning (Figure 3).
This is consistent with the signal from the ANZ Housing Search Index that the rate of decline in house prices might be close to slowing.
Figure 3. Housing credit impulse and house prices
At best we would characterise it as stabilising in both Sydney and Melbourne (Figures 4 and 5).
But this stabilisation is at a low level and it wouldn’t take much for the clearance rates to turn down again.
We would like to see evidence of a clear upturn in this indicator before we confidently conclude that the worst is pass for house price declines.
Figure 4. Sydney dwelling prices vs auctions
Figure 5. Melbourne dwelling prices vs auctions