Is the property market finally bouncing back?

The big banks were forecasting another year of severe declines for Australian property, but already in the first half of 2023 we've seen prices rebound with surprising strength. 

Sydney and Perth have led the charge according to CoreLogic, while other markets have seen their downturns suddenly reverse and return to monthly growth. 

So is this really the beginning of a new cycle of price increases?

Prices are on the up in 2023

In CoreLogic's latest report, Research Director Tim Lawless said "not only are we seeing housing values stabilising or rising across most areas of the country, a number of other indicators are confirming the positive shift."

The median property price in Sydney has already jumped +3.0 per cent since January, with bumps also seen in Perth, Melbourne, Brisbane and Adelaide.

Mr Lawless pointed out that auction clearance rates have now risen above long-term averages, sentiment has lifted, and buyer demand is increasing. 

So far, signs are pointing to the conclusion that Australia's property market has "moved through what has been a relatively short but sharp downturn," and the recovery could already be underway.

Forecasts have seen a major shift

Until April, the big four banks, along with several other key forecasters, were predicting larger property price falls in 2023 than we saw in 2022. 

As interest rates have moved towards their peak and the market has demonstrated major resilience, those expectations have been revised in a big way. 

In February, Westpac was forecasting national price declines of -8 per cent for 2023, while NAB predicted a massive -11 per cent drop. 

Two months later, Westpac now sees a stabilisation occurring with prices holding flat for the year, while NAB's cautious projection has been wound right back to a -3.8 per cent dip. 

Louis Christopher from SQM Research, who late last year proposed four different forecast scenarios for 2023, recently crossed the most negative outcome off his list in light of improving inflation figures.  

His three remaining scenarios project anything from prices holding flat to national growth of up to +9 per cent for the year, lending weight to the case that the downturn is indeed over.

Low listings and high net migration will continue to support prices

There are a few key reasons that prices have rebounded in spite of the historic string of interest rate hikes. 

Listings have held well below average since September, and that shortage of available homes on the market has created more and more competition among buyers. 

The volume of home sales has continued to climb in 2023, suggesting a growing number of buyers out there in the market. As a result, auction clearance rates are showing far stronger results than in the second half of last year. 

We may only expect more buyer-side demand, too, as immigration surges. Our rental markets are in crisis, pushing more and more tenants towards home ownership, while new entrants may also elect to move straight to purchasing.

The market still faces some headwinds, though

While low listings and rising demand are helping to change the momentum of price growth, other factors are still putting downward pressure on the market. 

The RBA's decision to raise the cash rate in May caught many economists by surprise. If any more increases are still to come it would likely threaten the current rebound. 

There is also a delay between the point at which rates rise and when the full impacts are felt across the economy. The forthcoming 'fixed rate cliff' is one example of this. 

With close to 900,000 Australians on ultra-low fixed rate mortgages due to reset to far higher variable rates across 2023, there is concern that forced sales due to mortgage stress could broadly draw prices lower. 

At this point, it remains a hypothetical point of discussion and may not end up having a significant impact on the housing market, but economists and industry experts are treating the topic with caution. 

Sellers look to be in a strong position right now

Ultimately, there's no knowing for sure what the future holds for our property markets. What does seem evident, though, is that sellers in the current market are being met with strong buyer competition. 

PropTrack research showed in February that the number of potential buyers per listing was surging. Since then, listings have only continued to dwindle while buyer demand has increased. 

Auction clearance rates are delivering strong weekly results, prices have risen from their low points, and the latest ABS figures show lending increasing in March, particularly for first home buyers, suggesting more people are ready to dive into the market. 

With the quiet winter months fast approaching, listings may only become scarcer in the short term, meaning more opportunities to sell in isolation from other vendor competition. All eyes remain on the RBA, though, to find out where things might be headed for the rest of the year.

1. CoreLogic, 'CoreLogic Home Value Index: Further evidence Australia’s housing downturn is over', 30 April 2023
https://www.corelogic.com.au/news-research/news/2023/corelogic-home-value-index-further-evidence-australias-housing-downturn-is-over

2. Westpac IQ, 'Australia’s housing market set to stabilise', 24 April 2023
https://library.westpaciq.com.au/content/dam/public/westpaciq/secure/economics/documents/aus/2023/04/er20230424BullHousingToStabilise.pdf

3. NAB, 'NAB Quarterly Australian Residential Property Survey Q1 2023', 13 April 2023
https://business.nab.com.au/nab-quarterly-australian-residential-property-survey-q1-2023-59397/

4. SQM Research, 'Christopher's Housing Boom And Bust Report 2023', 22 November 2022
https://sqmresearch.com.au/boombustreport.php

5. CoreLogic, 'Five things to know about the ‘fixed-rate cliff’', 24 February 2023
https://www.corelogic.com.au/news-research/news/2023/five-things-to-know-about-the-fixed-rate-cliff

6. Proptrack, 'Your weekly PropTrack digest - Economist Update' email newsletter, 24 February 2023

7. Australian Bureau of Statistics, 'First home buyer loans rose in March', 05 May 2023
https://www.abs.gov.au/media-centre/media-releases/first-home-buyer-loans-rose-march