The signs of growth in the housing market are not expected to bloom into a full recovery in the next months, according to market watchers. Instead, recovery is likely to come after a few more years.
While the low interest-rate environment and improving housing affordability are boosting the chance for recovery, sluggish consumption and stalled wage growth continue to affect the country's residential property sector.
On a positive note, the housing market appears to already be in the trough and is already bottoming out, said Kylie Rampa, chief executive for property at Lendlease. She said positive growth indicators will likely flow through over a period of time.
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"You start to get some price growth, then you get some more activity; it all starts building. It will take time. Over the next two to three years we think the market will continue to strengthen," she told The Australian Financial Review.
Rampa said a gradual recovery is also expected to happen in the credit market.
"We always say, 'you go up by the stairs and down by the elevator.’ It is coming back, but it is not back to where it was at the peak of the cycle," she said.
Some economists, like UBS's George Tharenou, are worried about the green shoots appearing in the housing market, saying they could easily lose steam before they even have any desirable impact.
Tharenou said that weak credit growth, the increase in housing supply, and a smaller number of listed homes appear to be suggesting that the recent rate cuts by the central bank and the easing of serviceability rules are not enough to fuel a lasting boom.
"After July credit growth slid to an eight-year low, even with more loans ahead, housing and total credit may only bounce to 4% year on year, as interest-only mortgages expire to principal and interest and up to 70% of mortgagees don't change payments after rate cuts," he said.
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Despite the pick-up in buyer activity in the auction market, Adrian Lee, founder of Catalyst Advisers, said the market still needs more accessible credit, similar to what propelled the last housing boom.
"I am not confident in the depth or longevity of current demand. If stock levels or supply returned to the same levels as at the peak of the boom, I highly doubt the demand would keep up with it. The truth is that most if not all applicants cannot borrow the same amount of money today as they could a year or two ago despite a reduction in interest rates and serviceability benchmark rate," he told AFR.
