Price declines ease further in October as listings remain low

The Australian property downturn slowed again last month, boosting hopes that the most significant price declines have come to pass. 

Spring listings remain well below average while demand has "held reasonably firm", helping to "contain price falls" according to CoreLogic's latest report. 

So where is the market headed as 2022 draws to an end? 

National property prices: October 2022

The national median home price fell by -1.2 per cent in October, a reduction from the -1.4 and -1.6 per cent declines seen in September and August respectively. 

Sydney prices were down by -1.3 per cent for the month, while Melbourne recorded -0.8 per cent, both softening from the previous month. 

Brisbane clocked the largest drop of -2.0 per cent, demonstrating the city's delayed path on the downturn. Adelaide, meanwhile, continued to hold relatively flat, correcting by just -0.3 per cent. 

Perth was down just -0.2 per cent, while Darwin's -0.8 per cent decline brought the city to an even 0 per cent growth for the quarter. 

The remaining capitals, Hobart and Canberra, steadied slightly around the -1.0 per cent mark for October. 

The trend of regional markets coming to match their metropolitan counterparts also continued for the month, with the combined regionals experiencing a -1.4 per cent price decrease. 

House prices have again underperformed when compared to units, which CoreLogic's Research Director Tim Lawless explained was an expected outcome. 

"The gap between median house and unit values increased to record levels through the Covid upswing. With borrowing capacity being hit hard as interest rates rise, it’s likely more housing demand has been diverted towards more affordable sectors of the market," he said.

Listings hold at below-average levels while demand steadies

A muted spring selling season has continued to see new listings fall below typically expected levels as summer approaches. 

Despite a slight uptick in October, new stock coming onto the market was more than -25 per cent lower than the same month last year and remains nearly -19 per cent lower than the five-year average. 

"Although we are now seeing a late spring response to freshly advertised supply, every capital city except Darwin is recording a lower than average flow of new listings added to the market over the past four weeks," Mr Lawless said. 

"The low number of freshly advertised properties is probably helping to contain price falls to some extent. So far we haven’t seen any evidence of panicked selling or forced sales."

Looking to the buyer side, home sales in the capitals are +3.8 per cent above the five-year average for the quarter, suggesting demand is holding strong. 

"The number of home sales is well down from the highs of late last year, however, the fact that sales activity is still above the five-year average over the past three months reflects a base level of demand remains for housing," Mr Lawless noted. 

He noted that much of that demand is coming from people buying and selling at the same time, meaning that upsizers, downsizers and relocators are still transacting in healthy numbers. 
 

2022 declines are still greatly outweighed by recent growth

Despite the prices dropping at significant rates in a number of markets, Mr Lawless said "the housing downturn has remained orderly, at least in the context of the significant upswing in values."

When comparing the trough-to-peak growth from the recent boom, the declines that have followed are still a long way off resetting prices to pre-Covid levels. 

Sydney home values have experienced the largest drop from their peak so far, although the Harbour City was also the first to begin falling and has been showing signs of easing in recent months. 

Brisbane too has attracted negative headlines as price declines have accelerated since mid-year, however, those prices are being taken off the top of a period of +42.7 per cent growth. 

Only two of CoreLogic's 86 sub-state regions are now showing values at slightly below pre-Covid levels — both being inner areas of Melbourne, zones characterised by an oversupply of high-density apartments. 

Overall, the vast majority of Australian homeowners are in a net positive position since the start of the pandemic, with 66 of the 86 regions still at least +20 per cent up from March 2020 prices. 

Regional markets continue to follow capital city trajectories

After an extended boom, the rate of monthly declines in Australia's regional markets have been closely matching their capital city counterparts for several months now. 

SA was the only state where regional property gained value in October, with WA also sticking close to zero. All other states have been in decline since May or June. 

Again looking at the wider context, these prices are dropping from a national point of +41.6 per cent growth over the pandemic, making the -4.9 per cent fall from the June peak comparatively very small. 

Domain's Chief of Research and Economics, Dr Nicola Powell, pointed out "there is no market in Australia that isn’t impacted by the changes to borrowing capacity."

Even so, she noted that regional prices had proved more resistant so far and should continue to do so due to the relative affordability of regional areas. 

What's next for the Australian property market?

A second consecutive +0.25 per cent hike to the cash rate represents another restrained response from the RBA and could point to interest rates peaking sooner rather than later. 

We're not necessarily out of the woods yet, though, as the latest inflation figures were higher than expected, suggesting the Reserve Bank may need to tighten things further. 

Mr Lawless pointed out that, "despite the easing in the pace of decline, with Australian borrowers facing the double whammy of further interest rate hikes along with persistently high and rising inflation, there is a genuine risk we could see the rate of decline re-accelerate as interest rates rise further and household balance sheets become more thinly stretched."

A further acceleration in the property downturn in 2023 is being predicted by all four big banks, who are expecting next year's declines to be larger than this year's. 

The banks' forecasts are notoriously conservative, though, and Mr Lawless noted that there are a number of factors that could prove to be strong upsides for the housing market. 

Among them are the return of immigration stoking demand, tight labour markets leading to rising wages, a challenging rental market incentivising investors, and high household savings built up over the pandemic helping homeowners weather mortgage increases. 

The CoreLogic report concludes that vendors will need to keep expectations in line with the market conditions, be willing to negotiate, and invest in marketing and presentation to stand out from the competition in order to achieve a successful sale result.