Sydney and Melbourne house prices may have "found a floor" in July

Australian property prices could move higher through 2019.

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The latest house price data from industry provider Corelogic is out and shows property markets may have decisively reversed their near two year slide on the back of regulatory changes designed to loosen lending restriction and as the RBA cut benchmark lending rates from 1.5% to 1% between June and July 2019.

CoreLogic head of research Tim Lawless said, "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. Since peaking, the national index is down 8.3%."

Over the month average Sydney and Melbourne dwelling prices both edged 0.2% higher to follow on from fractional gains in June. Over the past year average dwelling prices are still down 9% and 8.2% respectively for the two major east coast capital cities. The best performing capital city markets over the past year are Hobart and Canberra up 2.8% and 0.8% respectively. 

Recently the banking regulator APRA scrapped its rule that home loan lenders like Westpac Banking Corp (ASX: WBC) or National Australia Bank Ltd (ASX: NAB) must assess home loan applications on the basis that the borrower is able to pay back the loan at an interest rate of 7%.

Now the banks only have to assess loan serviceability using an interest rate buffer of at least 2.5% over the loan's rate to help avoid mortgagor's defaulting. The regulator justified its move on the basis that the 7% limit was no longer appropriate given benchmark rates are now just 1%. 

Analysts have estimated the change means your average borrower can now borrow 14% more than under the previous rules. No surprise that house prices are edging higher again then.

Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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