CoreLogic’s head of research, Tim Lawless, said it appeared the broader property market had stopped falling.
“The July home value index results provide further confirmation that the housing market has reacted positively to the recent stimulus of lower mortgage rates and improved credit availability, however, the response to date has been relatively mild,” he said.
While most capital cities lifted in July, there were falls in Canberra (-0.3 per cent), Adelaide (-0.3 per cent) and Perth (-0.5 per cent).
Unit values in Perth dipped by 1.1 per cent to be 10.1 per cent lower over the past 12 months.
UBS senior economist George Tharenou said the improvement in July marked the end of a 21-month drop that had wiped 8.4 per cent from the total value of Australian dwellings.
During that period, sales had dropped to a 23-year low, down 21 per cent over the past year alone, while the turnover rate of properties was also at a near-record low.
Mr Tharenou cautioned that those expecting a return to pre-correction prices were likely to be disappointed.
“While prices and sentiment have clearly turned, we remain cautious and do not expect a V-shaped recovery,” he said.
“However, following co-ordinated policy easing, we have upgraded our house price outlook to a 3-5 per cent year-on-year gain ahead, broadly in line with income growth. Importantly, given the only modest price gains we expect, and still weak volumes, this recovery will likely not be a material boost for consumption.”
While values have climbed, more expensive properties – which suffered some of the biggest falls in values – are now seeing some of the better gains.
Mr Lawless said the top 25 per cent of the market had enjoyed stronger value gains than cheaper properties.
The upper end of the market showed a “stronger trajectory” in both Sydney and Melbourne after experiencing deeper falls when values were sliding.
“With borrowing capacities recently increasing as a result of lower mortgage rates, and a reduced serviceability floor, existing owners may increasingly be looking to upgrade into more expensive homes,” he said.
“Despite value declines across the board, more expensive housing stock has generally recorded greater declines, which may be offering home owners the opportunity to upgrade into a more expensive property despite the recent value declines.”
CommSec economist Ryan Felsman said housing markets would still have to contend with an influx of supply over coming months as house and apartment projects were completed.
He said there could be a boost to consumer confidence.
“With the Aussie sharemarket straddling record highs and home prices finding a floor, consumers may start to feel a bit more chipper. That said, continued job gains remain crucial to improving sentiment,” he said.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.