The CoreLogic Home Value Index of national home prices rose 0.4 per cent in October – the first monthly increase since April. Prices were up 3.9 per cent over the year. Capital city home prices lifted 0.2 per cent with Melbourne (-0.2 per cent) the only city to post a decline in prices. Regional home prices out-performed, up 0.9 per cent in October – the most in 3½ years.
Home prices hit record highs in 21 of the 88 SA4 regions across Australia in October. And home prices rose in 67 of the 88 SA4 regions in the month, led by outsized gains of 5.8 per cent in Outback Queensland and 3 per cent in Queensland’s Darling Downs-Maranoa region.
The AiGroup Performance of Manufacturing Index rose from 46.7 in September to a 2-year high of 56.3 in October. But the ‘final’ IHS Markit Manufacturing Purchasing Managers’ index eased from 55.4 in September to 54.2 in October. Readings above 50 indicate an expansion in activity.
Home price data is important for retailers, especially those focussed on consumer durables. The manufacturing data provides guidance for companies in the Industrials sector.
WHAT DOES IT ALL MEAN?
Record home prices in a recession. Yes, you read that correctly! Across regional and suburban Australia median home values hit record highs in 21 Statistical Area 4 (SA4) regions in October, according to CoreLogic. (SEE LIST BELOW) Even more impressive is the geographical spread with prices hitting all-time highs in seven NSW regions, six Queensland regions, four South Australian regions and three Tasmanian regions.
‘Lifestyle’ locations continue to benefit from the health crisis and greater worker flexibility with demand for the NSW Mid and North Coast regions particularly strong. In Queensland, the Gold and Sunshine Coasts have become even more desirable for prospective home owners. And prices in some suburbs of ‘virus free’ cities’ Adelaide, Brisbane, Canberra and Hobart have hit all-time highs as the housing market recovery continues.
Encouragingly, the easing of government COVID-19 restrictions in regional Victoria saw dwelling prices in North-West Victoria (+1.5 per cent), Bendigo (+1.3 per cent), Warrnambool & South-West Victoria (+0.9 per cent) and Geelong (+0.8 per cent) all rebound in October. The potential for a ‘bounce-back’ in Melbourne prices is something to watch in November, despite headwinds from high unemployment and lower population growth.
In further good news, Aussie manufacturing activity expanded by the most in over two years in October, according to the Australian Industry Group. And with manufacturing and logistics’ powerhouse Melbourne emerging from lockdown, factory production could lift even further into year end. Activity in Victoria lifted 9.6 points to 47.3 in October. But NSW saw a strong 11.8 point gain to 56.1 points – a solid expansion on the back of strong demand for food and beverages.
WHAT DO THE REPORTS AND FIGURES SHOW?
Home prices – October
The CoreLogic Home Value Index of national home prices rose by 0.4 per cent in October to be 3.9 per cent higher over the year.
In capital cities, prices rose by 0.2 per cent to be up 3.7 per cent over the year. House prices climbed 0.4 per cent in October, but apartment prices eased by 0.2 per cent. House prices were up 4.1 per cent on a year ago and prices of apartments increased by 2.5 per cent.
In regional areas, home prices jumped 0.9 per cent in October with house and apartment prices both up by 0.9 per cent. Regional home prices were up 4.8 per cent on the year to October with houses lifting 5 per cent and apartments up 3.8 per cent.
The average Australian capital city house price (median price) in October was $678,198 and the average unit price was $566,151.
Home prices were higher in seven of the eight capital cities in October: Sydney (+0.1 per cent); Melbourne (-0.2 per cent); Brisbane (+0.5 per cent); Adelaide (+1.2 per cent); Perth (+0.6 per cent); Hobart (+1 per cent); Darwin (+1.2 per cent); Canberra (+1 per cent).
Home prices were higher than a year ago in seven of the eight capital cities in October: Sydney (+6.1 per cent); Melbourne (+0.7 per cent); Brisbane (+3.5 per cent); Adelaide (+4.4 per cent); Hobart (+6.5 per cent); Darwin (+2.8 per cent); Canberra (+6.8 per cent). But Perth prices were broadly unchanged.
Total returns on national dwellings rose by 7.6 per cent in the year to October with houses up 7.8 per cent and units up by 6.9 per cent on a year earlier. In contrast, the S&P/ASX All Ordinaries Accumulation Index fell by 6.5 per cent over the year to October.
Manufacturing Purchasing Managers’ indexes – October
The AiGroup’s Performance of Manufacturing Index rose from 46.7 points in September to a 2-year high of 56.3 points in October. But the ‘final’ IHS Markit Manufacturing Purchasing Managers’ index eased from 55.4 in September to 54.2 in October. Readings above 50 indicate an expansion in activity.
AiGroup reported: “Australian manufacturers reported higher customer confidence in October, after months of subdued market condition. Respondents in the food & beverages sector noted more demand from people in New South Wales starting to eat out more. Others noted increased supermarket demand and a rise in interest sales. Respondents across all sectors noted a rebound because of pent up demand from the initial activity restrictions.”
And, “COVID-19 remains the main issue impacting Australian manufacturers. Some respondents said border restrictions were preventing sales trips and delaying investment decision making. Others noted difficulty obtaining raw materials because of increased freight charges and inter-state border closures.”
IHS Markit reported: “The Australian manufacturing upturn lost some momentum at the start of the fourth quarter, with slower increases in output and new orders, according to the latest PMI survey data. While ongoing pandemic measures continued to weigh on manufacturing activity, logistical issues associated with global freight capacity disruptions and industrial actions at Australian docks also led to a reduced availability of input materials, which disrupted the production process.”
WHAT ARE THE IMPLICATIONS FOR INVESTORS?
Record-low mortgage rates and lifestyle changes – due to the pandemic – are encouraging Aussies to ‘dip their toes’ back into the residential property market. Sales activity in the ‘virus-free’ suburbs of capital cities and regional areas has picked-up – soaking up available housing stock and pushing up prices. But increased apartment supply, especially in Sydney and Melbourne, continues to buffer rents with renters perhaps preferring ‘spacier’ suburban and regional houses while working from home.
Interest rates are expected to remain at record-low levels for at least three more years with the official cash rate widely expected to be cut to just 0.1 per cent tomorrow by Reserve Bank policymakers. Demand for home loans by owner-occupiers has surged in recent months as confidence returns due to Australia’s success in supressing the virus. That said, the expiry of temporary loan repayment ‘holidays’, elevated joblessness, higher listing numbers and lower inbound migration could still influence home sales, building and prices in the near term.
RYAN FELSMAN
