The pace of the nation’s property market decline slowed further in May, with expectations of a rate cut and reforms to mortgage serviceability requirements lifting sentiment.
The monthly report card from data firm CoreLogic showed the drop in national dwelling values slowed from 0.5 per cent to 0.4 per cent in May, primarily driven by a slower rate of decline in Sydney and Melbourne.
CoreLogic head of research Tim Lawless said, while the housing market remained in a broad-based downturn, the outlook was more positive now than it was before the federal election.
The monthly decline in national prices has eased for five straight months since it was at 1.1 per cent in December, while auction clearance rates in Sydney and Melbourne have also begun to climb.
Nonetheless, Mr Lawless said the sector still faced a variety of headwinds, especially in the credit space.
“Although interest rates and serviceability tests are set to reduce, lenders are continuing to scrutinise incomes and expenses much more intensely,” Mr Lawless said.
“Comprehensive credit reporting is providing lenders with greater visibility around borrower finances and overall debt levels, and progressively lenders are reducing their exposure to borrowers with high debt levels relative to their income.”
The RBA is tipped to move rates for the first time since August 2016 on Tuesday, with the market already pricing in a new record low of 1.25 per cent.
Mr Lawless said policy makers would no doubt keep an eye on the housing market amid increasing concerns over prospects for economic growth and stubbornly low inflation.
“If we see housing values surging higher on the back increased stimulus measures, we may see macro-prudential or other policy levers being pulled in an effort to provide house price stability while at the same time supporting an improvement in economic activity,” Mr Lawless said.
National property prices have slid 7.3 per cent nationally over the past 12 months including with homes in the major capital cities dropping by 8.4 per cent in value.