The CoreLogic Hedonic Home Value Index results for July 2019 shows that national dwelling values (aka Australian house prices) may have stabilised, and five capital cities recorded price increases. What does this mean for ASX investors?
About CoreLogic
CoreLogic is a research firm that monitors residential and commercial property prices across Australia. The Home Value Index combines recent sales data with information about the attributes of individual properties.
According to CoreLogic, this allows them to distinguish between price changes due to property attributes and price changes due to underlying residential property conditions.
July 2019 Results
In July, Sydney, Melbourne and Brisbane house prices all recorded a 0.2% increase, while Hobart and Darwin increased by 0.3% and 0.4% respectively. Adelaide, Perth and Canberra prices all continued to fall throughout the month.
Overall, the national change in house prices in July was flat, while over the quarter prices were down 0.5%.
CoreLogic head of research Tim Lawless said the national index is down 8.3% since peaking, but it seems as though prices may be stabilising.
“Our national dwelling value index may have found a floor in July, with dwelling values holding firm over the month following a consistent trend towards smaller month-on-month declines through the first half of the year,” he said.
How Does This Affect The ASX?
Rising house prices are good news for ASX companies in a range of industries, including the banks, real estate investment trusts (REITs) and builders.
Over the long term, Commonwealth Bank of Australia (ASX: CBA), Stockland Corporation Ltd (ASX: SGP), Domain Holdings Australia Ltd (ASX: DHG) and many others could benefit.
But Wait…
Investors should be wary about putting too much weight on just one month worth of data. I’d be watching closely over the next few months to see whether prices continue to rise in Spring.
It’s also important to keep in mind that this recent boost is arguably not part of the natural cycle – in other words, house prices have been propped up by RBA rate cuts, APRA regulation changes and the government introducing new incentives.
Before getting too excited about a rising property market, I’d be questioning whether those growth drivers are sustainable or whether it’s just a short-term hit.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
