National property market two weeks away from record high
Australia's property market is just weeks away from erasing the May 2022 to January 2023 downturn, with dwelling values rising for the ninth consecutive month in October.
Property prices have delivered another property price rise for the ninth month in a row.
Sydney, Perth and Brisbane have now exceeded 10 per cent growth for 2023, as CoreLogic’s national Home Value Index (HVI) rose a further 0.9 per cent in October.
The national property market is about two weeks away from hitting a record high.
Since finding a trough in January, the national HVI has increased 7.6 per cent, leaving the index only half a per cent below the historic high recorded in April last year.
Property prices could reach as much as 7 per cent higher nationally through the 2024 financial year, according to economists, analysts and banks.
Buyers are clamouring to buy before prices rise further, as listings remain strangled.
October listing numbers fell over the last month across most capital cities.
Perth was again the peak performer for the month, with property prices rising 1.6 per cent, ahead of Brisbane (1.4 per cent) and Adelaide (1.3 per cent), according to the CoreLogic data released Wednesday (1 November).
CoreLogic Research Director, Tim Lawless, said regional markets continue to lag their capital city counterparts. At a broad level, the combined regional index was up 0.7 per cent in October compared with a 0.9 per cent rise across the combined capitals, and this trend of higher growth in the capitals was evident across every state.
“Despite the slower pace of growth, every rest of state region recorded a rise in home values over the month, except regional Tasmania where values were flat,” Mr Lawless said.
“Similar to the trend in the capitals, regional Queensland, WA and SA are showing stronger conditions with each of these rest of state regions at record highs in October.”
The correlation between listings and capital growth is undeniable.
Melbourne has rebounded up 5.7 per cent, together with Canberra, which continues to show consistent strength, increasing 16.8 per cent over the month.
Accordingly, the Victorian capital recorded relatively anaemic growth of 0.5 per cent for October and Canberra was even lower at 0.1 per cent. The two cities with the highest listings rates only outperformed Darwin, where property prices inched down 0.1 per cent.
Vanessa Rader, Head of Research, Ray White Group, said new listing volumes are following a similar spring time trajectory as 2022.
“This is in contrast to the 2021 period, which is more aligned with the seasonal uplift we have historically seen.
“While interest rate uncertainty is a major catalyst for this change, the housing supply issue across the country adds to vendors’ hesitation in coming to market in fear of not being able to secure a new home.
“Similarly, investors have absorbed financing increases thanks to strong gains in average rents and this secure and growing income stream is encouraging many owners to hold their assets.”
While the PropTrack Home Price Index differed from the CoreLogic HVI, showing monthly price growth at 0.36 per cent nationally, it also found that all capitals except Darwin saw prices rise in October. The smaller capital city markets recorded a stronger pace of growth over the month, led by Brisbane and Perth.
More property price rises ahead
Eleanor Creagh, Senior Economist, PropTrack, said that although the volume of new listings hitting the market has risen over the spring selling season, the demand for housing has remained strong, fuelling further home price growth and reflecting the sustained improvement in conditions.
“Strong demand stemming from the rebound in net overseas migration, tight rental markets and limited housing stock has offset the impacts of substantial rate rises and the slowing economy.
“At the same time, dwelling approvals have declined, hitting decade lows earlier this year.
“The sharp rise in construction costs, compounded by costly delays arising from labour and materials shortages, has slowed the completion of new homes.
“Despite a weaker outlook for the economy, population growth is rebounding strongly and this looks set to continue.
“Interest rates may rise further, but they are likely close to, if not at, their peak.
“Together with a shortage of new home builds and challenging conditions in the rental market, home prices are expected to rise further.”
The New South Wales housing market is the largest component of the Australian housing market with the total housing value of $4 trillion or 40 per cent of total national housing value
Dr Kevin Hoang, Investment Property Research Manager, Senior Economist, inSynergy Advisory, said the strength of the NSW housing market is underpinned by high population growth, a diverse and dynamic economy, large infrastructure investments, and its role as Australia's gateway for overseas investment and international trade.
“Looking ahead, most housing activities will be concentrated in Greater Sydney due to job opportunities and business prospects.
“Affordability will continue to be the primary driver of housing price growth in Sydney, and as a result, the Northwest and Southwest regions, along with properties priced under $1.5 million, are expected to lead in terms of growth prospects.
“Units in convenient areas close to amenities and major public transport corridors have been in high demand among singles and small families, which will see a boost in both rental and price growth,” he said.
Investors still reluctant
While property markets have rebounded significantly from the start of the year, investor activity has fallen significantly since interest rates started rising.
The latest Australian Bureau of Statistics lending indicators show the number of new investor loan commitments have fallen more than 27 per cent since interest rates started rising in May last year.
Nicola McDougall, Chair, Property Investment Professionals of Australia (PIPA), said record low rental vacancy rates appear to be entrenched given investor purchases have not only fallen significantly over the past 18 months, but many thousands are selling off their assets, too.
“It’s clear the normal flow of investment activity – both inbound and outbound – has been off-kilter for some time, so, until that changes, vacancy rates will remain at record lows and rents will climb ever higher,” she said.
“While governments talk about offering incentives to the big end of town for such supply strategies as build-to-rent, not a red cent has been offered to private investors who supply more than four in every five rental properties in this nation.”
Ms McDougall said property prices in most locations had posted solid growth over the past two quarters in particular given stronger market metrics.
“Of course, the low supply of listings was part of the reason why, as well as strong rental market conditions and record overseas migration,” Ms McDougall said.
“Indeed, a number of reliable forecasters are predicting even stronger market conditions next year – although it appears that listings have started to increase over recent times.”