Green shoots in the housing market are continuing to grow

Guest Post from Tony Alexander

Signs that the housing market is turning around are now becoming more plentiful – and the majority of those signs are to be found in my various monthly surveys.

For instance, my latest survey of real estate agents around the country shows that a net 32% are seeing more people attending open homes. This is the highest result since February 2021 and well up from a net 5% two months ago seeing fewer people perusing properties in person.

A net 55% of agents are seeing more first home buyers compared with 22% in each of the previous three months, and a net 3% seeing fewer in January.

As a result of these shifts, the net proportion of agents still saying that we are in a buyer’s market has slipped to 29% from 39% in January. This is still quite firm and tells potential buyers that there is still time left to make a purchase without vendors being able to hold out for their preferred price and accept no conditions.

There is also a good number of properties still on the market. But the number is falling and at the end of May the inventory of nationwide listings was down 13% from the peak at the end of December. This is after making allowance for seasonal shifts.

My survey of real estate agents still shows that buyers are worried that prices will fall soon after they make a purchase. But the 49% of agents observing these price worries (otherwise known as FOOP, or fear of over-paying) is the lowest since January 2022 and down from 68% last month.

Why is the real estate market turning around from falling prices and sales, and heading towards flatness — or quite possibly even gains for both measures?

I have repeatedly run through factors pushing the market to a turning point since early this year and here is a recap.

The key thing perhaps to note is that many of the things which I have been discussing are stronger or happening sooner than I anticipated.

Foremost amongst those happening earlier is the peak in monetary policy. The Reserve Bank clearly don’t want to take the cash rate above the current 5.5%. I did not think they would send a top of cycle signal until a few months from now. This means buyers will be thinking about rates falling and losing their fear of further increases sooner than I anticipated.

The second factor turning faster than expected is net migration flows. The annual gain now stands at 65,400 from a loss of 20,000 a year ago and the way things are going we could hit close to 100,000 in a few months’ time.

The labour market is holding up better than I expected, with growth in job numbers of 0.5% in the December quarter and 0.8% in the March quarter. High job security will tend to underpin the willingness of people to buy.

The Reserve Bank has also eased LVR rules effective from June 1, and the CCCFA rules have been tweaked. Agents have reported in my survey that buyers are showing signs of getting concerned about the availability of listings.

Put all these things together and we have an overwhelming number of indicators and factors pointing towards prices flattening – as they have done for the past two months – and soon rising.

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