Looking back over the past 12 months we're pleased to share that home values are still the highest they’ve been for decades, although we’ve seen slight declines since February 2022. In July 2022, according to CoreLogic, Australian home prices fell by 1.3%. However, we must remember that this fall comes off extraordinary growth. Through the heady days of FOMO during the worst of the pandemic, national home prices were up 28.6%. And while growth for the next 12 months might not be the turbo-charged rates we saw in 2020 and 2021, we are still seeing some upward trends.
As at 02 August 2022, the ANZ-Roy Morgan Consumer Confidence index was sitting at 84.1 points, just 8.2 points below the ‘normal’ weekly average of 92.3 points. The small drop is due to investors, lenders and home buyers factoring in the higher interest rates, energy and food prices of recent months, and as these prices ease, we expect to see confidence continue to climb back to normal.
While low interest rates supported housing market activity for the past few years, inflation is now leading the Reserve Bank to raise them. Bear in mind that interest rates are still very low, just not at the record lows of the past few years. Based on what is happening in the United States and Europe, we expect interest rates to stabilise by March 2023. However, as noted by Tim Lawless from CoreLogic, indebted households are more sensitive to these hikes.
Over July 2022, five of the eight capital cities saw a decline in property prices. Perth (+0.2%), Adelaide (+0.4%) and Darwin (+0.5%) remained in positive growth through July. We would expect a slight bounce-back in September or at least when warmer weather encourages more seller and buyer activity and as buyers and sellers become accustomed to more normal property market conditions.
Clearance rates declined in capital cities in the third week of August 2022. Sydney and Melbourne sat at 56% while Brisbane (44%), Adelaide (64%) and Canberra (50%) were all below historical highs. However, according to The Australian Financial Review, auction clearance rates rose for the third week in a row to 14 August, with listings up 9% over the previous week. Louis Christopher of SQM Research believes these are signs the auction market is levelling out and “The market has now found a base of buyers who see value in the market”. This is good news for sellers and buyers alike.
While spring is often noted as a peak selling season, figures bear out that autumn is the season that delivers the best sales results. However, with inclement weather dogging Sydney and much of NSW since January 2022, we expect to see the spring sales myth verified in 2022.
Another positive aspect is that properties for sale are becoming scarcer as demand exceeds supply. And while property commentators note that sales activity is down slightly in 2022, Jason Pellegrino from Domain believes that what we’re seeing is the housing market returning to normal conditions after the excesses of the pandemic.
As investors take advantage of higher returns they can achieve in the short-term rental market, we’re seeing listings contract by 4.5% across Australia. In Sydney, rental listings are at their lowest level for five years, while Melbourne listings are at a three-year low. Nationally, the vacancy rate is, as of 2 August 2022, sitting at 0.9%, meaning it’s difficult for renters to find suitable properties. As building activity slowed or ground to a halt during the peak of the pandemic, the usual pipeline of new apartments is two years away from completion, leaving renters at a disadvantage.
And while prestige regional areas like Bendigo, the Sunshine Coast, the Gold Coast and the Southern Highlands have seen property declines, continued low rental stock levels mean rentals in these areas continue to perform.
Rents nationally have risen at their fastest pace for 14 years according to the CoreLogic June quarter rental review. Commented CoreLogic research analyst, Kaytlin Ezzy, noted national dwellings recorded the strongest annual growth since December 2008. In capital cities, rents are 9.1% higher and regional areas up by 10.8% compared with the same period in 2021.
