September marked a striking turn in housing market sentiment, consumer confidence increased, new listings rose, and six of the eight capital cities recorded a rise in home values over the month.

The two capitals that failed to record a rise in home values are Sydney and, not surprisingly, Melbourne. Combined they make up approximately 55% of Australia’s housing stock; they together managed to drag Australia’s home values down to a 0.1% fall, which by the way is the smallest decline since values started to reduce in May this year. This led to a 0.2% drop in the combined capitals and a 0.4% increase in the combined regional areas.

The main culprit in this story is Melbourne, which recorded a 0.9% decline in housing values, totalling a 5.5% decline since peaking in March. What I must stress though, is that Melbourne is still up 3.1% over a 12 month period. That’s right, compare the current housing values with those of 12 months ago and Melbourne is still up by 3.1%.

Add to that the fact that the Stage 4 lockdown is nearing its end and I can’t help but being optimistic about the housing values over October and in particular November, when I expect to see quite a few auctions happening again.

Let’s address the regional markets now, which have continued to out-perform the capital cities with a 0.4% increase in value over September.

Tim Lawless, Head of Research at Corelogic, believes the resilience in regional values can be partially attributed to the fact that regional areas haven’t been recording the same growth rates pre-covid as the capital cities, so home values in these markets are often more affordable and don’t have a high base to fall from.

But I would add to that the transition of demand away from cities towards the major regional centres that we’ve been seeing, and in particular, those that are close to the larger capital cities so that residents can commute back to the cities if required.

Remote working arrangements are no doubt a factor in supporting demand in these markets as well, as well as lifestyle opportunities and a desire for lower density housing options.

Looking ahead, the housing market outlook is subject to headwinds as fiscal support is reduced, labour markets remain weak and mortgage payment deferrals become less common. However, low mortgage rates with the prospect of them reducing even further, low inventory levels, government incentives, and improving consumer sentiment will, in my opinion, outweigh the negative economic shock brought about by the pandemic.

As said earlier, I look forward to seeing the numbers of October and in particular the ones from November.