On the contrary, this growth appears set to forge ahead undeterred until the existing supply can fully accommodate the burgeoning demand. Fuelled by a confluence of unique market conditions and socio-economic factors, this resilience underscores the robust nature of Australia's property market, while simultaneously highlighting the critical need to balance supply with the ever-growing demand. This evolving landscape presents both challenges and opportunities for property sellers and buyers alike in navigating the dynamic market conditions.
Capital City property values increased by 1.4% in the quarter ending in April – marking the first quarterly rise since May of the previous year. This interrupts the remarkably brief but severe decline of 9.7% that held until February. This adjustment is only overshadowed by the slightly slower 10.2% fall recorded between 2017 and 2019.
The succession of these two downturns is intriguing, leading to the question: is it sustainable for property prices to ascend alongside cash rates? Although the cash rate serves as a helpful short-term indicator of price growth, other factors, including population growth and the supply of dwellings to the market, can have a more significant impact over time.
A fitting example is the early to mid-2000s when a boom in overseas migration and structural economic growth due to the mining surge occurred. Despite rising rates during this period, home values also escalated, a trend we're noticing presently.
Clearance rates, signifying the percentage of homes sold at auction, have also improved. Nationally, the clearance rate has remained at 65% over the four weeks to 10 May, up from 55% at the close of 2022.
According to ABS housing finance data, we're witnessing properties sell quicker and a resurgence Home lending increased across all buyer groups in Q1 2023, most notably, it grew 7.3% among first-home buyers.
Australia’s upper-end housing market, seen as a cyclical change gauge, typically leads to recoveries. Houses and units valued over $1.2 million and $800,000, respectively, fall into this category.
While combined capital city values rose by 1.4% last quarter, at the upper end of the market, house values grew by 2.3%, and unit values increased by 2.2%.
This behaviour at the high-end market acts as a leading indicator, suggesting a stronger recovery in the lower-end market soon. This reaffirms our entry into the next phase of the cycle.
Buyers are facing consistently low stock levels, with supply-demand mismatch driving this recovery. The growth in vendor listings is markedly subpar compared to previous years.
In the last four weeks, approximately 19,000 new properties entered the market, while 21,000 were sold, depleting our stocks. Total listings are roughly 24% below the usual figures for this time of year.
With overseas migration expected to add a record 400,000 people to Australia's population in 2022-23, and vacancy rates at record lows, more pressure is likely on the burgeoning rental crisis. Capital City unit rents escalated by 16.2% in the 12 months to April 2023.
Only 1% of rentals across capital cities are vacant, marginally increasing to 1.4% in regional markets. Traditionally strong migration areas are being surpassed by more affordable markets like Ipswich and Logan – Beaudesert in southeast Queensland.
Regional population flows are normalising post-Covid, easing regional house price growth. Yet, regional home values remain 31% higher than in March 2020. The supply-demand mismatch seems to be easing in the regions, but the shortage in capital cities appears far from ending.
Addressing the systemic supply shortage will require time, with little capacity to respond in the short term. The construction sector continues to grapple with tight labour and materials markets, project timeline overruns, and several notable builder insolvencies.
Recent government announcements, including new build-to-rent tax concessions and the goal of constructing a million affordable homes, won't take effect until 2024. This timing makes sense – initiating projects of such scale will only increase labour and material costs further, contributing to inflation pressures.
As the Australian property market continues to rebound, the time to sell has rarely looked better. With higher demand persisting amidst a low-supply landscape, property sellers are well-positioned to capitalise. Further interest rate rises or an economic downturn could impact the supply-demand balance, particularly if homeowners grapple with mortgage repayments.
APRA data indicates there hasn't been any significant late payment surge, and RBA data suggests around half of households have at least a year's buffer on their mortgage. If 3.85% is the RBA's limit, we may navigate this period with minimal impact.
Despite looming uncertainties, the data suggest a sustained recovery in Australia’s residential markets. If you're considering selling, there's no better time to take advantage of the rebounding market. Reach out to AgentSelect today – we're dedicated to helping property sellers find the top local real estate agents to secure the best price for your property.
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