Spring Property Market Update, published 9th November 2022

Like thousands of Australian, our eyes were glued to the dramatic Block auctions on Sunday night. The results speak volumes about the impact interest rates and high inflation have had on the property market

Eliza Owens, Head of Research at Core Logic analysed the results in an interview with the ABC.  She pointed out;  ” The Block began filming in March 2022, in an already volatile market. By the time the homes reached auction in November, the cash rate was up 275 basis points, consumer sentiment had plummeted, and sales volumes across regional Victoria were trending around 16 per cent lower than in 2021.¹”

Early this week, Core Logic released its October analysis of the property market.  Key stats to take out: ²

• The October national Home Value Index showed home values fell another -1.2% in October, the sixth consecutive month of decline.
• The pace of decline has eased over the past two months across Sydney and past three months in Melbourne but has gathered momentum in Brisbane.
• Despite this decline, housing values across most of the broad regions remain above pre-COVID levels.  For example, Sydney home values are down -10.2% since peaking in January (after a 27.7% rise), and Melbourne values down -6.4% since February (after rising 17.3%).
• Not surprisingly, the traditional Spring selling season is well below last year’s level of listings. Over the four weeks ending October 30^th, the number of newly listed capital city dwellings was tracking -25.2% below a year ago and almost -19% below the previous five-year average.
• On the demand side, the estimated number of home sales has held reasonably firm through the first two months of spring. Based on modelled sales over the three months ending October, capital city home sales were -16.6% lower than a year ago and 3.8% above the previous five-year average for this time of the year.
• When reviewing these stats, it’s important to note that there are segments within markets that are behaving differently to the broad results of regional and capital cities.

In the latest Core Logic report, Tim Lawless, Director of Research notes that despite the easing in the pace of home value decline, it is “too early claim the worst of the decline phase is over”. ²

“Despite the easing in the pace of decline, with Australian borrowers facing the double whammy of further interest rate hikes along with persistently high and rising inflation, there is a genuine risk we could see the rate of decline re-accelerate as interest rates rise further and household balance sheets become more thinly stretched,” he said³.

“To-date, the housing downturn has remained orderly, at least in the context of the significant upswing in values. This is supported by a below-average flow of new listings that is keeping overall inventory levels contained. There’s also tight labour market conditions, an accrual of borrower savings and a larger than normal cohort of fixed interest rate borrowers, who have so far been insulated from the rapid rise in interest rates.”⁴

Eleanor Creagh Senior Economist at PropTrack notes; “with further rises on the horizon, borrowing costs will increase and maximum borrowing capacities will reduce, weighing on prices. This will be offset by tight rental markets, rebounding migration, low unemployment, and housing supply pressures.” ⁵

In the footnotes we share the links to both the Core Logic and Prop Trak October articles.  Both include further stats on capital city and regional property market results.

Even in times of rising interest rates and decline in property values, people are still getting married, having babies, growing out of space, moving out of home, and getting divorced.  Which means people still need to buy and sell, and the property market is not at a standstill.

Please do not hesitate to contact us if you are thinking of buying or selling.  Having your finances organised is an essential first step.   

 ^Footnotes

1. ^{https://www.abc.net.au/news/2022-11-07/what-the-block-finale-says-about-the-australian-housing-market/101623746}
2. https://www.corelogic.com.au/news-research/news/2022/CoreLogic Home Value Index: Six months of falls for Australia’s residential property market | CoreLogic Australia
3. https://www.corelogic.com.au/news-research/news/2022/CoreLogic Home Value Index: Six months of falls for Australia’s residential property market | CoreLogic Australia
4. https://www.corelogic.com.au/news-research/news/2022/CoreLogic Home Value Index: Six months of falls for Australia’s residential property market | CoreLogic Australia
5. ^{https://rea3.irmau.com/site/pdf/c29a0d23-4629-48fe-b692-25b1287d3c05/PropTrack-Home-Price-Index-October-2022.pdf}