A lack of properties for sale and the first rise in Sydney home prices in more than a year have stabilised real estate values across the nation.
CoreLogic's Hedonic Home Value Index has recorded its smallest fall since interest rates started rising in May last year, at just 0.1 per cent for February.
The rival PropTrack index, using a slightly different methodology, is even more upbeat, recording a 0.2 per cent bounce in home prices nationally last month.
Both data providers say Sydney house prices drove the national result, with CoreLogic finding that they rose for the first time since January 2022, with a 0.3 per cent monthly gain.
Westpac's economics team noted that the rise in Sydney corresponded with tax changes implemented by the New South Wales government that allow most first home buyers the choice of paying an ongoing land tax rather than a one-off stamp duty, significantly reducing up-front purchase costs.
However, price declines generally eased right across the nation, according to CoreLogic.
Darwin (-0.3 per cent) was the only capital to see a steeper fall in February than the month before, while Hobart was the lone city posting a decline above 0.5 per cent (-1.4 per cent).
CoreLogic's research director Tim Lawless said there were fewer properties for sale on the market, putting a floor under prices.
"The past four weeks have seen the flow of new capital city listings tracking -17.0 per cent lower than a year ago and -11.9 per cent below the previous five-year average," he noted.
"This trend towards a below-average flow of new listings has been evident since September last year, coinciding with a loss of momentum in the rate of value decline."
PropTrack senior economist Eleanor Creagh said that was true for every capital except Hobart, explaining its continued steep price falls.
"Total listings are up more than 30 per cent in comparison to the previous five-year average. That increase in choice has eased competition between buyers," she observed.
'Reprieve could be short-lived'
While the pace of property price declines has eased in recent months, CoreLogic has posed the question of whether this is the "bottom of the cycle or eye of the storm?"
Mr Lawless said the prospect of further interest rate rises, weaker economic conditions and a rise in unemployment over the coming months all threaten to cause another down leg in property prices.
"There is a good chance this reprieve in the housing downturn could be short-lived," he warned.
"We also have the fixed-rate cliff ahead of us: arguably the full impact of the aggressive rate-hiking cycle is yet to play out."
The "fixed-rate cliff" refers to the reset of around 800,000 home loans this year, with many borrowers going from sub-2 per cent fixed interest rates taken out during the pandemic to variable rates around 6 per cent, or even higher.
With housing prices nationally off just over 9 per cent from their recent peak, according to CoreLogic, most forecasts from economists at Australia's major banks put the downturn as being only about halfway through.
"Other indicators remain broadly negative: buyer sentiment near cycle lows, price expectations subdued, risk aversion elevated and labour market confidence softening," observed Westpac's economists in their latest housing market report.
"Our Westpac Consumer Housing Sentiment Index points to the slide in turnover continuing [in the] near term. Prices are expected to decline a further 8 per cent nationally in 2023, lifting 2 per cent in 2024."
AMP's chief economist Shane Oliver agreed the market was only halfway to what he expected to be a roughly 15-20 per cent peak to trough fall, which would be the biggest in recent decades.
"It's possible that it is starting to turn up again, given the rapid return of immigration and the tight rental market, and the Australian housing market does have a tendency to surprise on the upside," he noted.
However, he believes rising unemployment, further rate rises (with the cash rate now widely expected to top 4 per cent) and the roll-off of 880,000 fixed-rate mortgages onto more expensive variable rates will trigger another leg down for property prices.
Dr Oliver also noted that borrowing capacity is down 25 per cent from its high last year due to interest rate rises and the late-2021 increase in APRA's mortgage serviceability buffer to 3 percentage points, reducing the maximum amount prospective home buyers can pay.
"It's worth noting that the 2010-12 and 2017-19 price fall cycles saw periods where falls moderated or partially reversed only to resume falling," Dr Oliver observed.
"The last two major upswings in property prices that started in 2012 and 2019 required rate cuts before prices started to rise. Right now, we don't anticipate rate cuts to start until late this year or early 2024."
PropTrack's Eleanor Creagh agrees it is too early to call an end to the downturn.
However, aside from the prospect of interest rates starting to ease later this year or early next, she said there are other factors that might put upward pressure on prices.
"If supply remains limited, this will help counter the downward pressure on home prices," she noted.
"Positive demand drivers stemming from the shortages in rental supply and rebound in international migration also remain."
