All data and commentary within this article are sourced from CoreLogic.1
It's been an eventful year so far for Australian property. The market downturn has suddenly reversed and price growth is back for most cities and regions.
The latest CoreLogic report1 put Sydney at the top of the growth charts for the month, but nearly everywhere has undergone a significant momentum shift since January.
With prices making another U-turn and interest rates on pause for April at least, will there be a renewed sense of confidence out there in the Australian property market?
The median Australian property gained +0.6 per cent in value in March, marking the first month of national positive growth since the first interest rate hike in May 2022.
As has been the case recently, results amongst the capital cities were particularly mixed.
Sydney returned to positive growth in February and since shot up by another +1.4 per cent in March, notching the city's median home value comfortably back above the $1 million mark.
Things bounced back in Melbourne and Perth, too, with gains of +0.6 and +0.5 per cent respectively. Prices stayed virtually level in Brisbane and Adelaide.
Some modest losses of around half a per cent were seen in Darwin and Canberra. Hobart fared worst of the capitals with a -0.9 per cent drop through March.
CoreLogic's research director Tim Lawless said that "although interest rates are high and there is an expectation the economy will slow through the year, it’s clear other factors are now placing upwards pressure on home prices."
The ongoing lack of listings, a persistently tight rental market and ever-increasing overseas migration all helped to shift the momentum of the downturn in the majority of locations.
Six months of well-below-average listings have helped to flip Australian property back into positive growth.
"Advertised supply has been below average since September last year, with capital city listing numbers ending March almost -20 per cent below the previous five-year average," Mr Lawless explained
As supply has waned there has been a relative uptick in buyer demand. Sales volumes in March were at the highest monthly level since May 2022, stirring up added competition among buyers.
For the time being, Mr Lawless said sellers were experiencing more favourable market conditions, but there is a possibility that could shift.
"Given that new listing counts have trended below average since spring last year, it’s reasonable to assume there is some pent-up supply that has accumulated behind the scenes," he said.
"Whether the flow of new listings starts to pick up with improved housing confidence will be a trend to watch."
Australia's regional locations also experienced a small revival in March, although the extended run of outpacing the capital cities was interrupted.
Across the combined regions, prices went up +0.2 per cent, with little action across the eastern states.
SA and WA were again the top performers, with home values remaining at all-time highs. Tasmania, meanwhile, continued to struggle, showing little sign of improvement.
Mr Lawless noted that "the best performing regional markets are quite different to what we were seeing through the recent growth cycle."
Instead of the "commutable coastal and lifestyle markets" attracting the bulk of regional price growth during the recent boom, rural areas are now coming to the fore.
"However, we are seeing some subtle growth return to regions within commuting distance of the major capitals, after many recorded a sharp drop in values.".
Fast-rising interest rates have been the key driver of Australia's property downturn over the past year.
There are, however, other forces helping to keep a floor under home values, and they now look to be gaining strength.
Exceedingly tight rental markets have seen vacancy rates plunge while rents have soared. Tenants can, on average, expect to pay close to +25 per cent more since the start of the pandemic in 2020.
Although the high-interest-rate environment presents a new challenge for buyers, Mr Lawless said that "with rental markets this tight, it’s likely we are seeing some spillover from renting into purchasing."
"Similarly, with net overseas migration at record levels and rising, there is a chance more permanent or long-term migrants who can afford to, will skip the rental phase and fast-track a home purchase simply because they can’t find rental accommodation."
The ongoing rental crisis may continue to be a factor in supporting and even driving up property values as the year goes on.
While national prices have returned to positive growth, CoreLogic and other outlets have been particularly cautious about calling the bottom of the market.
Their report pointed out several significant headwinds that could push prices back down throughout 2023, including a weakened economy, slowly rising unemployment, and tight lending conditions.
There is also the expectation that the full impacts of the rate-hiking cycle are yet to be seen for both borrowers and homeowners. Buyers may encounter more challenging barriers, and listings could rise from their exceedingly low levels.
On the other hand, there are some tailwinds that could help to balance the market out or even swing things further towards growth.
Inflation appears to be in decline and broader expectations are that interest rates are at or close to their peak which could bring some improvement to consumer confidence.
Demand may also be further stimulated by rising immigration as the rental crisis worsens and more tenants look to become buyers.
The question is how those positive and negative factors interact, but a more stable market may emerge now that the bulk of the rate-hiking cycle appears to be over.
1. CoreLogic News & Research, 'CoreLogic Home Value Index: National home values up 0.6% in March, breaking a 10-month streak of falls', 03 April 2023
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