Surprise property rebound brings first price growth in 10 months
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In the span of just two months, Australia's property downturn has halted and reversed, bringing price growth back in a number of cities and regions.
CoreLogic's latest report1 showed the swift bounceback was felt most in Sydney and Melbourne, but that most markets had experienced an upward shift in momentum.
With interest rates finally pausing in April, there could be a further boost in confidence on the way for the Australian property market.
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National property values: March 2023
The value of the median Australian home gained +0.6 per cent in March, making for the first month of positive growth since interest rates started rising back in May 2022.
There were mixed results among the capital cities, though, with one market soaring above the rest.
| Market | Month | Quarter | Annual | Median value |
|---|---|---|---|---|
| Sydney | 1.4% | 0.4% | -12.1% | $1,014,393 |
| Melbourne | 0.6% | -0.9% | -9.0% | $747,322 |
| Brisbane | 0.1% | -1.7% | -8.6% | $698,071 |
| Adelaide | -0.1% | -1.1% | 3.0% | $645,721 |
| Perth | 0.5% | 0.1% | 1.9% | $567,111 |
| Hobart | -0.9% | -4.0% | -12.9% | $650,689 |
| Darwin | -0.4% | -0.9% | 1.6% | $492,465 |
| Canberra | -0.5% | -2.0% | -8.1% | $828,175 |
| Combined capitals | 0.8% | -0.4% | -8.7% | $764,995 |
| Combined regional | 0.2% | -1.0% | -5.7% | $578,486 |
| Australia | 0.6% | -0.6% | -8.0% | $704,723 |
After showing signs of recovering in February, Sydney values shot up +1.4 per cent in March, pushing the city's median home price back over the $1 million mark.
Melbourne and Perth also saw things bouncing back with monthly growth of +0.6 and +0.5 per cent respectively, while Brisbane and Adelaide both held more-or-less flat.
Darwin and Canberra both lost around half a per cent in value, and Hobart came out worst with a -0.9 per cent drop for the month.
CoreLogic research director Tim Lawless explained that "although interest rates are high and there is an expectation the economy will slow through the year, it’s clear other factors are now placing upwards pressure on home prices."
A shortage of listings, extremely tight rental markets and record-level immigration are all helping to slow and even reverse the downturn in many areas.
Buyers are having to fight over what little stock is on the market
The key reason prices have flipped back to positive growth has been a severe shortage of listings.
Mr Lawless noted that "advertised supply has been below average since September last year, with capital city listing numbers ending March almost -20 per cent below the previous five-year average."
While supply has continued to fall, buyer demand has seen a boost. The volume of sales in March was at the highest monthly level since May last year, and that added buyer competition has helped elevate property prices.
Mr Lawless suggested sellers could regain some confidence in the more favourable market conditions.
"Given that new listing counts have trended below average since spring last year, it’s reasonable to assume there is some pent-up supply that has accumulated behind the scenes," he said.
"Whether the flow of new listings starts to pick up with improved housing confidence will be a trend to watch."
Regional markets resurge too but get outpaced by capital cities
On the whole, regional properties bounced back in March, however the long streak of outperforming the capitals has finally been interrupted.
The combined regional markets gained +0.2 per cent for the month, with the eastern states holding mostly flat.
| Market | Month | Quarter | Annual | Median value |
|---|---|---|---|---|
| Regional NSW | 0.0% | -1.4% | -8.7% | $684,764 |
| Regional VIC | -0.1% | -1.3% | -6.0% | $561,512 |
| Regional QLD | 0.3% | -0.8% | -4.6% | $553,156 |
| Regional SA | 1.0% | 2.0% | 11.3% | $358,258 |
| Regional WA | 0.9% | 1.5% | 4.9% | $423,045 |
| Regional TAS | -0.7% | -2.7% | -4.7% | $503,805 |
| Combined capitals | 0.8% | -0.4% | -8.7% | $761,674 |
| Combined regional | 0.2% | -1.0% | -5.7% | $575,916 |
Regional SA and WA continued their standout runs, remaining at all-time peak prices despite 10 rate hikes, while only Tasmania showed little sign of month-on-month improvement.
Mr Lawless pointed out that currently "the best performing regional markets are quite different to what we were seeing through the recent growth cycle."
After "commutable coastal and lifestyle markets" surged during the pandemic then fell during the market downturn, it's rural areas that have experienced the biggest growth lately.
"However, we are seeing some subtle growth return to regions within commuting distance of the major capitals, after many recorded a sharp drop in values," he said.
A tight rental market and high immigration are supporting home prices
Over the past year, the housing market has faced considerable downward pressure from rapidly rising interest rates.
Other forces are helping to cushion property prices, though, and two in particular look to be gaining strength.
A rental crisis has been developing on a national level. Vacancy rates have hovered around record lows and house rents in the capital cities have exploded nearly +25 per cent since the pandemic began in 2020.
"With rental markets this tight, it’s likely we are seeing some spillover from renting into purchasing," Mr Lawless explained, though high mortgage rates remain a barrier.
"Similarly, with net overseas migration at record levels and rising, there is a chance more permanent or long-term migrants who can afford to, will skip the rental phase and fast-track a home purchase simply because they can’t find rental accommodation."
With no end in sight for Australia's rental crisis, it could prove to be another ongoing element that helps to prop up housing prices in the high-rate environment.
What's next for Australian property?
Like many other economists and analysts, CoreLogic has been cautious about labelling the current shift as the bottom of the market.
Their report laid out a range of headwinds that could serve to push property prices down further as the year goes on.
Among them are the prospects of a weakened economy, gradually rising unemployment, and increased difficulty in securing loans.
There is also a delayed impact from interest rate hikes to be felt by borrowers, and the potential for listings to rise without being evenly matched by buyer demand.
The report also points out some of the tailwinds that may mitigate and possibly even overpower those negative forces.
Inflation looks to be in decline and interest rates are tipped to be near or at their peak which should bring some confidence back to the market.
Rising overseas migration will also continue to stimulate demand as the rental crisis worsens and more tenants look to become buyers.
How the positive and negative factors balance out remains to be seen, but with the bulk of the rate-tightening cycle now behind us, it's likely a more stable market will emerge.
1. CoreLogic News & Research, 'CoreLogic Home Value Index: National home values up 0.6% in March, breaking a 10-month streak of falls', 03 April 2023
https://www.corelogic.com.au/news-research/news/2023/corelogic-home-value-index-national-home-values-up-0.6-in-march,-breaking-a-10-month-streak-of-falls
