If we look at the past few years, Australia’s housing market has witnessed several significant fluctuations and trends. What began as a period of robust growth experienced several concerns and eventually led to regulatory measures being implemented to cool the market.

If you have purchased or sold a house recently then you would know what we are talking about.

Looking back, 2017 and 2018 saw a noticeable slowdown in price growth as more strict lending standards and restrictions were introduced to the market. However, this resulted in a more balanced market thanks to increased affordability and more moderate housing price increases for some people. But at the same time, certain areas experienced a decline in property values, particularly regions reliant on the mining industry.

In recent years, Australia’s housing market is now seeing a resurgence in activity. 

Coming down to 2023, after a mix of growth and several cooling measures the Australian housing market is finally ready for a subsequent rebound. 

A recent report by Westpac states that the housing market correction in Australia has finally reached its conclusion, as various factors have contributed to achieving stability. 

However, there is still a sense of caution in the near term, with prices projected to remain steady throughout this year. A significant recovery in the market is anticipated by 2024.

Read this full blog to uncover how the market is accelerating as a boom-like price growth finally returns.

A Closer Look at the National Property Prices in May 2023

To understand the current housing market better, let’s look at CoreLogic’s latest report published in June. Statistics clearly dictate that May has seen the strongest national growth as buyer demand continues to boom while the listings have decreased even more than before.

Even though the market can also witness further interest rate hikes in the future, it appears that the property market has entered a new phase with confidence and stability.

Let’s see how…

The Australian property market continued its resurgence in May, with the median value of Australian homes increasing by a significant 1.2%. This is reminiscent of the monthly growth observed during the booming period of 2021.

Sydney led the pack, with a whopping 1.8% increase in median home value. Brisbane was not far behind, with a 1.4% increase. Melbourne and Adelaide also posted solid gains of 1.0%, while Perth maintained its streak with a 1.3% increase.

Surprisingly, Hobart, which had been experiencing a prolonged downward trend, returned to positive growth with a 0.5% increase. Similarly, Darwin and Canberra also posted solid increases of 0.4% in their median home value.

Although regional markets recorded slightly milder results, they still remained positive with a combined uptick of 0.5% in May.

This resurgence in the Australian property market is being driven by a number of factors, including:

• Increased competition from buyers
• Rising auction clearance rates
• Reduced vendor discounting
• Improving economic conditions

This means that homes are selling faster and for higher prices. This is good news for sellers, but it could pose a challenge for first-time buyers. According to Tim Lawless, the Research Director at CoreLogic, buyers are now exhibiting increased competitiveness and a sense of fear of missing out (FOMO) as they actively participate in the market.

Buyer Demand Remains Stabily Higher than the Decreasing Number of Available Listings

The number of new listings in both the combined capitals and combined regional areas of Australia has declined compared to the previous five-year average, with a decrease of -13.1% and -18.0% respectively. 

All capital cities, except Darwin and Canberra, are experiencing a trend of new listings below the previous five-year average. As a result, total listings are also decreasing as buyer demand surpasses the availability of new properties on the market.

 

A very positive development is that there has been a slight increase in estimated home sales. Over the past three months, the number of dwelling sales in capital cities has risen to the highest level since July of last year.

So what could be better?

If we talk about housing supply and demand, Tim Lawless also stated that the Australian housing market has been experiencing a resurgence in recent months, with demand outpacing supply. 

In the past three months, there have been an average of 35,143 new listings introduced to the housing market, while there have been an average of 39,760 dwelling sales. 

This disparity between supply and demand is a significant factor contributing to the renewed upward pressure on housing values. More sales and fewer listings clearly thus indicate that the market is truly booming.

And what is the question crossing the minds of all sellers?

Will they beat the seasonal rush by testing the market in winter?

and…

If there is a surge in new listings during the spring selling season, could it potentially slow down the growth we have witnessed thus far in 2023? 

And why would this happen?

Because there would be more competition for buyers, which could lead to lower prices.

The Great Rental Crisis – More Tenants Choosing to Become Buyers Now

According to recent research conducted by SQM, the national residential property rental vacancy rate has continued to increase, reaching 1.2% in April 2023. This marks the third consecutive monthly rise in rental vacancies.

There are now approximately 36,785 residential properties available for rent across Australia. Sydney and Melbourne have experienced the largest increases in rental vacancy rates, reaching 1.4% and 1.2% respectively.

Brisbane, Perth, and Hobart have also seen rises in rental vacancy rates, reaching 1.0%, 0.6%, and 1.6% respectively. Notably, the number of rental vacancies in Hobart has tripled since the record-low levels observed in April 2022.

This increase in rental vacancy rates is likely due to a number of factors, including:

• The easing of COVID-19 restrictions, which has led to an increase in the number of people moving around the country.
• The rising cost of living, which is making it more difficult for people to afford rent.
• The increasing number of new rental properties coming onto the market.
• The increase in rental vacancy rates is good news for tenants, as it means that they have more choice and can be more selective when choosing a rental property.

It remains to be seen whether the increase in rental vacancy rates will continue in the coming months. However, if it does, it could have a significant impact on the Australian rental market.

Furthermore, most regional areas have witnessed a sharp increase in rental vacancy rates, indicating a reversal in the population flows back to larger capital cities.

Over the past 30 days until May 12, 2023, asking rents in capital cities have risen by 0.4%, with a notable 12-month increase of 20.7%. 

House rents in capital cities have risen by 0.1%, recording a 12-month increase of 17.7%.

Apartment rents have experienced a 0.7% increase in the past 30 days and a substantial 24.2% increase over the past 12 months. The typical weekly rent for a house in capital cities is $757, while for units it is $579.

Although a significant number of regional rents have decreased, causing the national median rent to remain unchanged in the past 30 days. 

Over the past year, the median rent has increased by 10.1%, reaching a weekly average of $568.

Louis Christopher, the Managing Director of SQM, stated that the latest rental market data offers some relief to renters nationwide. It is observed that tenants are adapting to this great rental crisis by choosing to live together, which helps free up rental properties. 

Not only this but more tenants have started transitioning into becoming first-time home buyers. It is likely that some landlords have been overly eager to raise rents, resulting in tenants seeking more affordable housing options elsewhere.

Summary – Calculating the Risks

As housing values continue to bloom for the third consecutive month, it is clearly evident that the market has surpassed a brief but intense decline.

Based on the past three months alone, the trend of recovery does appear to be solidifying. 

However, the future of the housing market still remains highly uncertain due to various factors like the possibility of further increases in interest rates, the potential for more households experiencing financial strain from mortgages, and persistently low levels of consumer confidence.

The ongoing upward movement in housing prices could potentially create a “wealth effect” where households will eventually feel wealthier. While this may seem positive to many, it also poses a risk of inflation.

Another concern is the potential increase in mortgage stress among homeowners. 

However, given the expected tight labor markets, the risk of distressed selling is likely to be limited. The trajectory of interest rates will play a crucial role in determining the outlook for housing markets.

Winters are here and the buyers are still thriving out in full throttle. Here’s to hoping that the coming spring months that this supply-demand balance doesn’t shift and keeps all you sellers out there still in the spotlight.