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June brought another month of strong property price growth across Australia according to CoreLogic's latest report1.
Total listings on the market are more than 25 per cent below average levels, meaning buyers are having to compete harder over a shortage of stock.
Following the RBA's decision to pause interest rates in July, will prices continue to rise in the second half of 2023?
May saw Australia's median property price spike by +1.2 per cent, a result that's nearly been matched with a +1.1 per cent uptick in June.
Sydney continued to lead the bold market recovery with a standout +1.7 per cent gain for the month, with Brisbane not far behind at +1.3 per cent.
Perth and Adelaide each delivered increases of +0.9 per cent while Melbourne gained +0.7 per cent.
More moderate gains of +0.5 and +0.4 per cent were experienced by Darwin and Canberra respectively. Hobart was the only capital city to see a decline in June of -0.3 per cent.
Regional markets on the whole had a more modest uplift of +0.5 per cent with mixed results between the top and bottom performers.
CoreLogic's research director Tim Lawless suggested that, while the cash rate paused at 4.10 per cent in July, any future hikes could still work to slow the market.
"Higher interest rates and lower sentiment will likely weigh on the number of active home buyers, helping to rebalance the disconnect between demand and supply," he said.
The long-running shortage of listings on the market has only been compounded by the beginning of the quieter winter season.
New listings were down -18 per cent in June compared to 12 months ago, with total listings falling a full -26.4 per cent below the five-year average.
Demand, meanwhile, has been on the incline. The volume of home sales was +2.1 per cent higher than the five-year average in the June quarter, illustrating an uptick in buyer demand.
Mr Lawless explained that "although homes sales are around average levels, available supply is well below. It is this disconnect between available supply and demonstrated demand that is driving housing values higher."
That's led to higher auction clearance rates being sustained and a reduction in vendor discounting on private treaty sales.
CoreLogic's report made the conclusion that current market conditions are favouring sellers. That dynamic is expected to continue throughout the winter lull.
The 'race for space' phenomenon which saw regional areas boom over 2020 and 2021 looks to have cooled off when comparing growth numbers to the capital cities.
“After regional population growth boomed through the worst of the pandemic, internal migration trends have normalised over the past year, resulting in less housing demand across regional markets," Mr Lawless said.
"Additionally, housing demand from overseas migration is skewed towards the capital cities rather than the regions."
Even so, regional home prices have grown steadily over the past quarter.
Regional Queensland and South Australia both posted strong gains of +1.0 per cent in June, while NSW and Western Australia also maintained positive growth.
SA and WA, in fact, recorded new all-time-high median prices for the month. Looking across the June quarter, Victoria is the only state to have registered a net decline in prices.
Tenants around Australia are still doing it tough, although there has been a slight increase in rental vacancy rates and a gradual deceleration in rental growth over recent months.
Rental conditions remain very tight, though, with asking rents surging by more than +11 per cent in the last year.
Looking at these details in isolation, it should be good news for investors looking for stronger returns.
As rate hikes drive loan repayments higher and higher, though, the market is seeing a rising number of investors opting out of the market.
According to CoreLogic data2, May saw overall new listings falling -13 per cent below average levels. Investor listings, however, were just -2.9 per cent below average.
"This really signifies that investor selling activity is persisting in an environment where owner-occupier selling decisions are waning," CoreLogic's Eliza Owen explained.
The latest data shows that 30 per cent of listings on the market are deemed to be investment properties, up from the decade average of around 25 per cent.
Ms Owen noted that, while rents have surged, "they generally have not risen as much as mortgage costs on a new loan," potentially driving some of the increased investor selling activity.
The RBA defied the big banks' expectations of another rate hike in July, opting to pause the cash rate at 4.10 per cent.
This will have come as a relief to borrowers and homeowners alike, but it may not be the end of the hiking cycle. Mr Lawless suggested there could be one or two further increases to come.
"Forecasts on where the cash rate will land and how long it will stay elevated vary, but it’s likely there is at least one more rate hike to come, potentially more," he said.
"It’s hard to imagine the recent pace of growth in housing values being sustained while sentiment is close to recessionary lows and the full complement of borrowers are yet to experience the rate hiking cycle in full."
The spring selling season may see listings creep back towards average levels which would also put downward pressure on property price growth, as would any increase in distressed listings.
"At the moment we aren’t seeing any signs that advertised housing stock is rising, at least at a macro level. This will be a key trend to watch moving forward," he said.
For now, overseas migration, low unemployment and a widespread supply shortage appear to be keeping sellers in the driver's seat.
1. CoreLogic News, 'Home Value Index shows housing values increase in June, but the pace of growth has slowed', 3 July 2023
https://www.corelogic.com.au/news-research/news/2023/home-value-index-shows-housing-values-increase-in-june,-but-the-pace-of-growth-has-slowed
2. CoreLogic News, 'As rates rise and times get tough, property investors opt out of market', 22 June 2023
https://www.corelogic.com.au/news-research/news/2023/as-rates-rise-and-times-get-tough,-property-investors-opt-out-of-market
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