All data and commentary within this article are sourced from CoreLogic.1
The property market continued its downturn at a more gradual pace to start 2023, with CoreLogic's latest report finding a -1.0 per cent national price decrease in January.
With interest rates approaching their peak and price declines easing, there may be more stability in the market as the year unfolds.
Both listings and sales are well below average, but there may be an uptick in activity up ahead as consumer confidence improves.
January saw the level of monthly price correction revert back to November's -1.0 per cent level, the mildest drop since the early stages of the interest rate tightening cycle.
The majority of capital cities displayed month-on-month improvement, however two of last year's most consistent performers endured a slight downshift.
Both Sydney and Melbourne experienced a softening in monthly decline, with prices dipping -1.2 per cent and -1.1 per cent respectively.
Brisbane also eased off with a -1.4 per cent drop, substantially less than the -2.0 per cent decline seen in October and November.
Things got a touch worse in Adelaide and Perth, though the respective -0.8 per cent and -0.3 per cent dips were still comfortably below the national average.
Hobart took the hardest hit in January of -1.9 per cent, while Darwin held more or less flat at -0.1 per cent and Canberra toed the line with a result of -1.0 per cent for the month.
Australia's combined regional markets once again outperformed the capital cities, falling just -0.8 per cent.
"The quarterly trend in housing values is clearly pointing to a reduction in the pace of decline across most regions," CoreLogic's research director Tim Lawless explained.
He did, however, say that "at -1.0 per cent over the month and -3.2 per cent over the rolling quarter, national housing values are still falling quite rapidly compared to previous downturns.”
The enduring trend of low stock on the market has carried over into 2023.
New listings in the capital cities were down -22.9 per cent in January compared with 12 months ago, falling -24.5 per cent below the five-year average.
"This trend of lower than normal levels of new listings has been persistent through spring and early summer and looks to be continuing into 2023," Mr Lawless said.
The low-listings environment carried across every city, suggesting sellers are remaining hesitant.
"Such a low number of new listings implies most homeowners don’t need to sell, rather, they seem to be prepared to wait this downturn out."
Buyers have also acted with caution as rates keep climbing. That's reflected in sales volumes over the past quarter which were down -11.5 per cent on the five-year average.
"There is a strong relationship between consumer attitudes and the number of home sales. With sentiment remaining around recessionary lows, it’s harder for consumers to make high commitment decisions such as buying or selling a home," Mr Lawless said.
January typically gets off to a slow start as people return from the summer break, but CoreLogic's auction clearance data shows the year is off to a surprisingly strong start following a weak December.2
The preliminary auction clearance results for the last weekend of January show Melbourne and Sydney hovering around 70 per cent, with the national average sitting at a fraction under 68 per cent.
Although CoreLogic pointed out these figures will likely be revised lower, they still point to a stronger auction market than we saw over the second half of last year.
Australia's regional markets have continued to outperform their capital city counterparts so far in 2023.
The milder -0.8 per cent decline for the combined regions seen in January indicated another moderate month after the drawn-out boom period that lifted regional home values by +41.6 per cent.
"Despite easing rates of internal migration and a partial erosion of the pre-pandemic affordability advantage, regional housing values are holding up better than capital city markets," Mr Lawless said.
He noted that the ongoing remote work trend would likely prevent any "mass exodus" from regional areas, helping to maintain the strength of those markets.
"This will be an interesting trend to watch over the longer term, but at the moment it seems regional housing markets have seen a structural shift in the underlying demand profile," he said.
Once the RBA board holds its first monthly monetary policy meeting for the year in February, it looks very likely that at least one more hike to the cash rate is on the cards.
Mr Lawless said, however, that inflation looks to have passed through a peak, and that may indicate interest rates are close to finding a ceiling. Beyond that point, property prices could start to flatten.
What might prompt price growth again, though? "The most obvious stimulus would come from a drop in interest rates, but any cut to the cash rate probably won’t occur until late this year at the earliest," he said.
"Other factors that could support housing activity would be a rise in consumer sentiment, an easing in credit policy… or fiscal incentives aimed at stimulating housing demand."
If listings begin to increase that may prove to be a stumbling block for prices. For now, though, well-below-average stock levels have "arguably helped to keep a lid on value declines."
Immigration is due to ramp up significantly in 2023 which is expected to only make Australia's rental crisis worse. That could result in an uptick in buyer demand, both from tenants looking to make their first purchase and from investors eager to capitalise on rising rents.
1. CoreLogic News, 'CoreLogic Home Value Index rate of decline eases despite -1.0% fall in January', 1 February 2023
2. CoreLogic News, 'The 2023 auction market is slowly ramping up with 706 capital city homes taken to auction this week', 30 January 2023
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