Is the property market finally recovering from its malaise?
There have been signs recently that prices in the major housing markets are ''stabilising,'' as economists like to say. But if there is a recovery taking place, the same analysts also admit that it's patchy, and a little precarious.
If we take a helicopter view of the economy, there have been tentative signs of an improvement in residential property lately.
In the September quarter, the Australian Bureau of Statistics said house prices rose in Sydney, Melbourne, Brisbane and Perth. Nationally, annual price growth has also returned for the first time since March 2011.
However, this official gauge is limited, because it is an average of detached homes and does not include apartments. Other figures from RP Data-Rismark suggest unit prices fell in the 12 months to October in most cities.
So, if there is a recovery under way, it's hardly broad-based. Despite this, many economists say there are several reasons to think that prices are on track to rise.
What's behind their optimism?
For one, lower interest rates have made borrowing cheaper, which could tempt people to bid up prices.
As the graph shows, annual growth in house prices rocketed to almost 20 per cent in early 2010, after the Reserve Bank slashed its official interest rate to 3 per cent during the global financial crisis.
Official rates are only a touch higher than this today, and the Reserve this month said there were signs the cuts had caused the housing market to strengthen. It also appears that confidence is ever so gradually returning to the market.
Auction clearance rates have risen to more than 60 per cent in the peak spring selling season and demand for loans from home buyers has risen in most months this year.
All the same, home buyers are hardly bullish.
A recent survey from Westpac found only half of its respondents thought house prices were set to rise, despite lower interest rates. Broader gauges of consumer sentiment also remain weak, with pessimists outnumbering optimists.
When people are this gloomy, the housing market is likely to remain fragile.