Sydney, Perth lead the charge as property market reaches turning point

The widely forecast property price crash appears unlikely to materialise, with dwelling values around the country stabilising or rising around the country.

Perth’s strong mining economy and Sydney’s high levels of migration have seen prices rise this month by 0.6 per cent and 1.3 per cent respectively, as Melbourne, (0.1 per cent), Brisbane (0.3 per cent), Adelaide (0.2 per cent) all recorded price growth.

Among the capital cities, only Darwin recorded a fall while Hobart and Canberra arrested recent price slides by flatlining for the month.

CoreLogic Research Director, Tim Lawless, said it is becoming increasingly clear the housing market has moved through an inflection point.

“Not only are we seeing housing values stabilising or rising across most areas of the country, a number of other indicators are confirming the positive shift,” he said.

“Auction clearance rates are holding slightly above the long run average, sentiment has lifted and home sales are trending around the previous five-year average,” he said.

Source: CoreLogic.

The more positive trend in housing values comes amid a worsening imbalance between supply and demand.

“A significant lift in net overseas migration has run headlong into a lack of housing supply.

“While overseas migration would normally have a more direct correlation with rental demand, with vacancy rates holding around 1 per cent in most cities, it’s reasonable to assume more people are fast tracking a purchasing decision simply because they can’t find rental accommodation,” Mr Lawless said.

At the start of the year, Australian house price growth took a breather, declining slightly by 0.2 per cent.

The stabilisation wasn’t completely unexpected. The drivers of price growth are still in place - there is a shortage of stock, population growth continues to accelerate and construction problems continue.

William Clark, Data Analyst, Ray White, said listings were again diving.

“Sydney, Canberra and Melbourne are still well down on the same month last year,” he said.

“Brisbane, Darwin and Perth again saw more moderate losses in listings, with Hobart now also seeing losses, while Adelaide remains as the only city seeing an increase to listings compared to this time last year.”

Tim McKibbin, CEO, Real Estate Institute of NSW, said the resilience of property prices spells trouble for first home buyers, despite the federal government expanding eligibility for its Home Guarantee Scheme (HGS) in a bid to tackle the housing crisis.

“The market has rebounded and this has happened despite the rate rises, showing the strength of demand amid the severe undersupply.

“Clearance rates are strong but stock levels are low. With prices on the increase, we could potentially see more vendors entering the market.

“Affordability remains a huge challenge and for people struggling to accumulate a deposit, especially those renting, there’s little reason to feel optimistic about the future.”

Sydney real estate on the rise

Sydney has now recorded its first quarterly increase in a year for houses and the most substantial quarterly gain since late 2021 – a turnaround that follows three consecutive quarters of decline.

Despite the rise, the current pace of quarterly growth of 1.3 per cent is moderate compared to the historical average of 2.8 per cent.

Dr Nicola Powell, Domain’s Chief of Research and Economics, said it still suggests that Sydney house prices have passed a trough to end the steepest downturn the Sydney property market has ever seen.

“It is premium areas leading the price recovery – such as the eastern suburbs and city and inner-south.”

Overall house prices remain 8.4 per cent below the March 2022 peak, down about $134,000.

After declining for four consecutive quarters, unit prices increased over the first three months of 2023. This quarterly growth has slowed the annual pace of decline, however, prices are still 5.5 per cent lower than the peak recorded in 2021, amounting to a decrease of approximately $44,000.

Perth a tale of two property types

Perth’s house and unit markets are diverging.

Perth house prices increased over the March quarter to an all-time high.

Perth and Adelaide are the only capital cities currently at a record high.

But the Perth upswing continues to lose steam as quarterly house price growth more than halved compared to the previous quarter, reducing the annual increase to a two-and-a-half-year low.

Unit prices actually declined over the March quarter, reversing all of last quarter’s growth.

Perth and Melbourne are the only capital cities with a record price gap between property types after Perth house prices outperformed unit prices for eight consecutive quarters.

This is likely to widen as quarterly and annual growth rates head in opposite directions.

Multi-speed property market emerging

Domain’s Ms Powell said Australia’s housing market has now reverted back to a multi-speed one, meaning different markets are growing at different rates than they were pre-pandemic.

“This provides opportunities for both buyers and sellers in different locations,” she said.

“The shift is being led by our larger capital cities, which normally lead the property market recovery given that historically, they hit a peak price earlier and fall faster.”

She added that although lower listings are creating rising competition between buyers and helping to improve prices in certain markets, high-interest rates and tight serviceability requirements are still keeping many on the sidelines.

Source: CoreLogic.

“As prices lift in certain areas, it’s a timely reminder that interest rates are not the only factor influencing housing activity and prices.

“Population growth is rebounding faster than anticipated, with record levels of overseas migration playing a driving role in our housing markets.

“Extremely tight rental markets are also making purchasing more attractive and may shift some to buy, given the current challenges of securing a lease,” Ms Powell said.

Melbourne’s real estate market has stabilised and is now 6.5 per cent below the December 2021 peak, down by about $71,000 and back to mid-2021 pricing. However, they are a substantial 16.1 per cent higher than before the pandemic property boom.

Unit prices in Melbourne are tanking.

The decline accelerated over the March quarter, producing the third consecutive quarter of decline and the steepest annual fall on record. Unit prices are now 11.9 per cent below the December 2021 peak, down by about $71,000.

The city experienced its sharpest yearly decline in history, dropping unit prices back to mid-2019 pricing. In percentage terms, unit prices have now fallen further than house prices.

Brisbane house prices flatlined over the March quarter, but still experienced the steepest annual decline in roughly 11 years.

House prices are now 6.1 per cent below the June 2022 peak, down by about $53,000 and back to late 2021 pricing. Brisbane has, however, seen the sharpest improvement of all capitals, along with Sydney and Melbourne.