After steady falls of around 10%-15% or more since mid-2017 it seems that Sydney and Melbourne's house prices are starting to move higher today if the usually reliable auction clearance rates are anything to go by.
According to data from Domain Holdings Australia Ltd (ASX: DHG) operated domain.com.au, Sydney saw preliminary auction clearance rates of 71% and 77% over the last two weekends respectively, with Melbourne at 65% and 74% respectively.
Generally property 'experts' reckon that clearance rates north of 70%-75% mean prices are almost certainly rising as bidders have little trouble in meeting or beating sellers' expectations.
According to Corelogic data, Sydney and Melbourne house prices already edged 0.1% and o.2% higher in June.
It's no surprise that major capital city prices will probably post a rise for July given borrowing costs just got a whole lot cheaper after the RBA slashed interest rates from 1.5% to 1%.
Moreover, APRA just moved to scrap its rule that lenders must assess home loan applications on the basis that the borrower is able to pay back the loan at an interest rate of 7%.
APRA has now stipulated the banks must use an interest rate buffer of at least 2.5% over the loan's rate to help avoid mortgagor's defaulting. It has justified the move on the back of the RBA taking benchmark lending rates to a record low 1%.
In other words the 7% buffer is now too big a spread on real world mortgage rates given that according to Finder.com most mainstream banks and lenders will now offer mortgage rates between 3%-4%. Analysts have estimated that APRA scrapping its serviceability rule means borrowers can now afford to borrow around 14% more and it's not far fetched to think this could translate into a house price rebound around this level.
