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Home prices down -5.3% in 2022 after quiet December

June 1, 2023
Andy Webb

Home prices down -5.3% in 2022 after quiet December

All data and commentary within this article are sourced from CoreLogic.1

Australian property prices fell another -1.1 per cent in December according to CoreLogic's latest report, marking another muted month. 

The trend of below-average listings and a lull in sales continued as both buyers and sellers waited on the sidelines for more certainty about the future of the housing market. 

With a very turbulent year for property now behind us, what's in store for 2023? 

National housing prices: December 2022

December's price performance was very similar to November, with Australian homes falling in value by another -1.1 per cent, totalling -5.3 per cent declines for the year. 

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The fragmentation between capital city markets continued, with a full 2.0 per cent difference between the biggest winners and losers. 

December presented another mixed bag of results for Australia's capital cities. Source: CoreLogic

Sydney home values fell by -1.4 per cent in December, a slight increase from November's -1.2 per cent, while Melbourne also saw a gentle acceleration in the downturn with a -1.2 per cent drop. 

Conditions in Brisbane eased off, bringing a -1.5 per cent decline for the month, while Hobart and Canberra maintained a consistent course, reporting falls of -1.9 per cent and -1.2 per cent respectively. 

Adelaide remained one of the country's star performers, notching down just -0.4 per cent over the month, while Perth edged into positive territory with a +0.1 per cent boost. Darwin returned to the negative with -0.5 per cent. 

Regional markets overall delivered slightly stronger results than the capitals, dropping -1.0 per cent in December, bringing median values right back to the start of 2022. 

Tim Lawless, CoreLogic's research director, explained that interest rate hikes were the key factor driving the downturn throughout the year. 

"Our daily index series saw national home values peak on May 7, shortly after the cash rate moved off emergency lows. Since then, CoreLogic’s national index has fallen -8.2 per cent, following a dramatic +28.9 per cent rise in values through the upswing," he said. 

Most markets are still substantially higher than pre-pandemic prices

Over 2022 as a whole, Australian home values declined -5.3 per cent. While that's a significant number, it's still relatively small when put into the perspective of the recent boom.

2022's major property downturn still pales in comparison to the boom that preceded it. Source: CoreLogic

From the market's Covid low point to the 2022 peak, the national median property price rocketed up +28.6 per cent, with some markets coming close to +50 per cent gains. 

The CoreLogic report noted that "across the combined capital cities, dwelling values remained +11.7 per cent above where they were at the onset of COVID (March 2020), while values across the combined regional markets are still up +32.2 per cent."

Despite historic falls in cities like Sydney, there would still have to be further significant declines for most markets to return to that pre-pandemic level. 

A shortage of listings remained apparent in December

Persistently low levels of stock on the market was one of the key characteristics of 2022, and that trend continued in December. 

New listings in the capital cities were -30.6 per cent down over the four weeks to Christmas when compared to the same period in 2021. That's nearly -10 per cent below the five-year average.

Listings remain well below average as sellers have remained on the sidelines. Source: CoreLogic

Total available stock was also -7.8 per cent lower year-on-year, falling a massive -19 per cent below the five-year average. 

"The trend in housing inventory showed a conspicuous lack of seasonality through spring and the first month of summer, with advertised supply holding reasonably firm post-winter," Mr Lawless explained. 

"Vendors have been reluctant to test the market through the downturn."

Buyer activity has also been sluggish. Home sales in the capitals were -16.5 per cent lower than they were last December, although they remained +7.4 per cent higher than the five-year average, suggesting demand could still be outstripping supply in most markets. 

Regional markets return to end-of-2021 levels with mixed results

Although growth in continued for longer than the capitals, 2022 also ended up being a rocky year for Australia's regional markets. 

There was a clear winner for the year when looking at the state-by-state rundown, though. 

Regional markets delivered a wide array of results for 2022. Source: CoreLogic

Homes in regional SA rose by a staggering +17.1 per cent over the 12 months and is still recording positive monthly growth. 

Regional WA also held onto positive growth, ending the year with gains of +5.7 per cent. 

The NSW and Victorian markets, meanwhile, dipped into the red with -2.7 per cent and -1.3 per cent annual drops respectively. QLD and Tasmania posted fairly modest levels of growth for 2022. 

Australia's regions have fallen into step with the capital city markets. Source: CoreLogic

Overall, the regions have fallen closely into line with their capital city counterparts in recent months, though relative affordability and a broad lack of stock have helped to cushion the fall. 

Units and affordable homes outperformed while the top end suffered

Affordability has been a major factor in how different properties have performed since interest rates began climbing. 

Typically, the upper quartile of the market — ie. the top 25 per cent of properties by price — has suffered the most, while competition has been more concentrated in the low-to-mid range. 

"The more expensive end of the market tends to lead the cycles, both through the upswing and the downturn," Mr Lawless explained. 

As a more affordable option, units have held their value better than houses across most city and regional markets. 

Australia-wide, the median house price fell by -5.6 per cent in 2022 compared to -4.1 per cent for units. 

The effect was most pronounced in Melbourne, where houses fell at nearly double the rate (-9.4 per cent) as units (-4.8 per cent).

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What comes next for Australian property?

When looking at how the market will progress in 2023, there are two key factors to look at. 

The trajectory of interest rates remains the number one concern, at least for the first half of the year, and forecasts are wide-ranging. Westpac and ANZ both expect a peak cash rate of 3.85 per cent to hit in May, while CBA predicts just one more bump to 3.35 per cent will be the last we'll see in this cycle. 

A variety of economists are also talking about the possibility of rates being cut later into 2023. However things pan out, interest rates will continue to have a large influence over Australia's property markets. 

The other big driver will be buyer and seller activity. There was a lot of hesitation by both parties in the second half of 2022, and there are questions around if and when that pent-up demand will be released. 

“The balance between the flow of new listings and number of home sales will be a key trend to watch through early 2023," Mr Lawless said. 

"We typically see a seasonal surge in the number of new listings added to the market from early February through to Easter. 

"If this seasonal pattern plays out over the coming months against the backdrop of higher interest rates and a further drop in buying activity, we could see housing prices responding negatively as advertised supply levels rise and vendors are forced to discount their prices more substantially."

For now, Australia's labour markets and overall economy remain in a strong position, which again should help cushion the country's property sector. 

1. CoreLogic, 'CoreLogic Home Value Index: Australian housing values down -5.3% over 2022', 02 January 2023

2. RateCity, 'How high will rates go? Here's what experts think about the RBA cash rate', 22 December 2022

This market update is written expressly for education purposes and content is based on the opinions of the authors or as otherwise cited.  All information is current as at publication release and we  take no responsibility for any factors that may change thereafter. Doorsteps Finance Pty Ltd ABN 27 648 541 879 and Doorsteps Solutions Pty Ltd ACN 654 334 246, the holder of Australian Credit Licence 537369 does not accept any liability or responsibility whatsoever to any error or omission or any loss or damage of any kind sustained by a person or entity arising from the use of this information.  It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances.

Disclaimer: Property reports contain property estimate data and information provided by RP Data Pty Ltd trading as CoreLogic Asia Pacific ABN 57 087 759 171 (CoreLogic) and OpenAgent Pty Ltd, which is general in nature. It is not a professional property valuation or advice to be relied upon. The actual market value of the subject property may differ. We and CoreLogic do not warrant the accuracy, currency or completeness of the data and information to the full extent permitted by law, each excludes all loss or damage howsoever arising (including through negligence) in connection with the information. You rely on the property estimate at your own risk.

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