Property prices defy high rates with another 1.1% boost in June

Australia's median property price continued to rise in June despite the cash rate having climbed above 4 per cent. 

According to CoreLogic's latest report, total available listings are now more than 25 per cent below average levels, concentrating buyer competition and putting upward pressure on home values. 

With the RBA opting to pause rates in July, is there more strong growth to come?

National property prices: June 2023

We've now seen a second consecutive month where Australia's median property price rose by more than +1 per cent, with all but one capital city experiencing growth. 

Sydney was once again the pick of the bunch with a mighty +1.7 per cent uptick over June. Brisbane was close behind with gains of +1.3 per cent. 

Adelaide and Perth both delivered strong growth of +0.9 per cent, while Melbourne maintained a steady pace at +0.7 per cent.

More modest gains were seen in Darwin and Canberra with +0.5 per cent and +0.4 per cent respectively, with Hobart registering the only decline of -0.3 per cent. 

Regional markets held a slower but steady pace with an overall uplift of +0.5 per cent. 

The rate of national growth was marginally less than in May, leading CoreLogic's research director Tim Lawless to suggest that any future rate hikes may still slow the market down. 

"Higher interest rates and lower sentiment will likely weigh on the number of active home buyers, helping to rebalance the disconnect between demand and supply," he said.

Listings have only fallen further this winter while demand is up

The ongoing shortage of listings has only deepened in the property market's quieter months. 

New listings for June were down -18 per cent on the same month in 2022, while total listings were down a staggering -26.4 per cent on the five-year average. 

On the other hand, home sales were in fact +2.1 per cent above the five-year average for the June quarter, demonstrating a widespread increase in buyer demand. 

"Although homes sales are around average levels, available supply is well below. It is this disconnect between available supply and demonstrated demand that is driving housing values higher," Mr Lawless explained. 

He went on to point out that auction clearance rates are significantly higher than they were a year ago while private treaty sellers are more able to hold firm on their price expectations. 

The report went on to conclude that market conditions are clearly favouring sellers, a dynamic that's unlikely to change over the winter lull.

Regional markets deliver sustained, but slower, growth

After the regional rush that occurred around 2020 and 2021, things have shifted somewhat outside of the capital cities. 

“After regional population growth boomed through the worst of the pandemic, internal migration trends have normalised over the past year, resulting in less housing demand across regional markets," Mr Lawless said. 

"Additionally, housing demand from overseas migration is skewed towards the capital cities rather than the regions."

Despite this change in buyer appetite, prices have still been on the incline over the past few months.

In June, regional Queensland and South Australia both delivered growth of +1.0 per cent, while NSW and Western Australia were also in positive territory. 

In fact, SA and WA have returned to all-time highs, while Victoria is the only regional market to have seen a net decline over the past quarter.

Rental market showing early signs of easing as investors sell up

It will be little consolation to tenants, but the rate of rental growth is gradually decelerating while vacancy rates have notched up slightly. 

The rental market is still extremely tight, though, and asking rents have risen by +11.5 per cent over the past 12 months. 

In isolation, this represents more good news for investors as returns continue to rise. 

But as rate hikes drive mortgage repayments ever higher, more and more investors are opting to bail out of the market. 

CoreLogic reported that, while generally new listings were more than -13 per cent below average in May, investor listings were down just -2.9 per cent. 

"This really signifies that investor selling activity is persisting in an environment where owner occupier selling decisions are waning," CoreLogic's Eliza Owen explained.

As of May, just over 30 per cent of all listings on the market were deemed to be investment properties, up from the decade average of around 25 per cent. 

Ms Owen noted that, while rents have surged, "they generally have not risen as much as mortgage costs on a new loan," potentially driving some of the increased investor selling activity.

What's next for Australian property?

All eyes were on the RBA's July cash rate decision, and the news that rates would hold at 4.10 per cent should come as some relief to borrowers and homeowners alike. 

Even so, we're not necessarily out of the woods yet. Mr Lawless speculated that there may still be another hike or two in the near future. 

"Forecasts on where the cash rate will land and how long it will stay elevated vary, but it’s likely there is at least one more rate hike to come, potentially more," he said. 

"It’s hard to imagine the recent pace of growth in housing values being sustained while sentiment is close to recessionary lows and the full complement of borrowers are yet to experience the rate hiking cycle in full."

The potential for listings to climb back towards average levels in spring also presents a risk to price growth, as does any increase in distressed listings due to rising mortgage repayments. 

"At the moment we aren’t seeing any signs that advertised housing stock is rising, at least at a macro level. This will be a key trend to watch moving forward," he said. 

For now, overseas migration, low unemployment and a widespread supply shortage are keeping sellers in the driver's seat. 

1. CoreLogic News, 'Home Value Index shows housing values increase in June, but the pace of growth has slowed', 3 July 2023
https://www.corelogic.com.au/news-research/news/2023/home-value-index-shows-housing-values-increase-in-june,-but-the-pace-of-growth-has-slowed

2. CoreLogic News, 'As rates rise and times get tough, property investors opt out of market', 22 June 2023
https://www.corelogic.com.au/news-research/news/2023/as-rates-rise-and-times-get-tough,-property-investors-opt-out-of-market