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Housing market outlook: Domain shares surge, listings rebound

We examine some of the key developments in Australia’s property market during May.

Australia's housing market Source: Bloomberg

Housing market: May summary

Though dwelling values fell in May – transaction and industry activity exhibited some positive signs – bouncing back from their April lows.

Quantifying these declines, on a month over month basis, the most pronounced declines in national dwelling values were: Darwin (-1.6%), Melbourne (-0.9%) and Sydney (-0.4%), according to CoreLogic's most recent monthly report. Overall, national dwelling values fell by 0.4% in May – though remain up 0.6% for the quarter and a significant 8.3% higher, on an annual basis.

For reference, the median house price in Australia currently stands at $557,818.

In response to this announcement, CoreLogic's Head of Research, Tim Lawless said:

‘Considering the weak economic conditions associated with the pandemic, a fall of less than half a percent in housing values over the month shows the market has remained resilient to a material correction. With restrictive policies being progressively lifted or relaxed, the downwards trajectory of housing values could be milder than first expected.’

Mind you, although the market has ‘remained resilient’, there remains uncertainty about how it will perform once a number of pro-property policies are scaled back or removed. Indeed, as Mr Lawless goes on to say of the outlook for Australia’s property market:

'Eventually government stimulus will wind back and borrower repayment holidays will expire. In the absence of these policies, housing values could come under some additional downwards pressure if economic conditions haven't picked up towards the end of the year.'

Domain and REA Group share prices rise as consumer confidence rebounds

Regardless of those longer-term uncertainties, property-centric equities have traded bullishly over the last two sessions: REA Group (REA) rose 2.3% on Monday and 0.5% on Tuesday; while Domain Holdings (DHG) soared 9.9% on Tuesday, to finish out the session at $3.32 per share.

Importantly, while house prices fell on a national level, as noted at the start, CoreLogic also revealed that sales activity rebounded 18.5% in May. The property focused research house made the point that historically, there is a ‘strong correlation’ between consumer confidence and the property market.

On that front, in May, the Westpac-Melbourne Institute Index of Consumer Sentiment -- which maps consumer confidence – rose 16.4% on a month over month basis to hit 88.1. In April, the index gave an ‘incredibly weak’ reading of 75.6.

As the Westpac consumer confidence report highlighted regarding May’s figures:

‘Consumers are clearly heartened by Australia’s success in containing the Coronavirus which has justified the easing of some of the social restrictions that have been so painful for individuals and the economy over the last two months.’

In step with this rebound in consumer sentiment, CoreLogic reported that new property listings rose 8.1% in May, from their April lows, while real estate agent activity on CoreLogic’s platform also climbed during May.

How to trade REA Group & Domain: long and short

What do you make of these developments: do you see bullish or bearish opportunities? Whatever your view, you can trade the likes of REA Group and Domain – long or short – through IG’s easy-to-use trading platform.

For example, to buy (long) or sell (short) REA Group using CFDs, follow these easy steps:

  1. Create an IG Trading Account or log in to your existing account
  2. Enter ‘REA Group’ or ‘REA in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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