Low Sydney listings a conundrum for finance chiefs

Activity across CoreLogic RP Data's mortgage platforms supports the Reserve Bank of Australia's observation that growth in lending to the housing market has been consolidating over recent months.

As noted in previous monthly articles, activity across the mortgage platforms experienced extremely robust growth in February and March, increasing by 31 per cent in February (over January) and a further six per cent (off the already strong February number) in March.

April is a difficult month from which to draw too many observations given the shortened working month as a result of Easter and Anzac Day.  

At a high level, the lending market seemed to pause and take a breath in April, with average working day volumes dropping three per cent over the March numbers, although they were up 13 per cent over the corresponding month in 2014.

Melbourne stands out in terms of softness in the month of April, although as noted above this could be as a result of many factors, given the time of year.

It is also worth highlighting that compared to this time a year ago:
•    The Sydney market has materially more mortgage-related activity; and
•    The Perth market is exhibiting increased signs of weakness and inactivity compared to 12 months ago.

The Sydney and Melbourne housing markets are already responding to lower mortgage rates; since the previous interest rate cut in February CoreLogic RP Data has reported auction clearance rates moving to new record highs and the annual trend in capital gains has rebounded higher after moderating over most of 2014.

With mortgage rates now moving even lower we are expecting dwelling values will continue rising, however it is hard to imagine the high rate of capital gain in Sydney won't start to moderate over the coming months as investor demand is curbed by tighter lending policies for investment loans and also by diminishing rental yields and affordability.

One of the most interesting aspects of the Sydney market at present is the number of properties listed for sale.

Despite the strong market conditions in Sydney, the total number of properties listed for sale in Sydney (18,138) is actually less than each of Melbourne (29,838) and Brisbane (19,113), which are much smaller markets than Sydney.  

This is an interesting market dynamic, given one would ordinarily expect that more owners would be looking to test the market in such strong market conditions.  

The fact that this is not the case warrants further industry discussion and debate on the inhibitors (such a stamp duty, means testing rules and other taxes) that may create strong disincentives for people to sell their property.

This listings data also implies that the robust level of mortgage related activity in Sydney at present can be attributed to a strong refinance market.