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Price declines soften as October listings dip below average

May 29, 2023
Andy Webb

Price declines soften as October listings dip below average

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

Australia's property market downturn eased off again in October according to CoreLogic's latest Home Value Index report, fuelling speculation that the worst of the price falls may be over. 

The spring selling season has been marked by a shortage of new listings against "reasonably firm" demand which has helped to "contain price falls," the report explained. 

With 2022 drawing to a close, where will the market go from here? 

National housing prices: October 2022

September and August saw declines of -1.4 and -1.6 per cent respectively, so a -1.2 per cent drop in Australia's median house price for October was a relative softening from previous months. 

October saw price falls ease again in the majority of markets. Source: CoreLogic

After leading the downturn for some time, the downturn in Sydney and Melbourne improved, falling -1.3 and -0.8 per cent respectively for the month. 

Brisbane, meanwhile, recorded the largest decline for October with -2.0 per cent, as the city continued to catch up after its extended period of growth. 

Adelaide remained the strongest market in annual terms, notching down just -0.3 per cent in a quarter that has been close to flat. 

Perth and Darwin also saw less significant moves of -0.2 and -0.8 per cent respectively while hanging on to positive annual growth. 

Hobart and Canberra sat somewhere in the middle, each recording falls of around -1.0 per cent for October. 

Regional markets once again closely matched their metropolitan counterparts, clocking a combined -1.4 per cent decrease throughout the month. 

CoreLogic's Research Director Tim Lawless noted that units have continued to outperform houses as the downturn has unfolded. 

"The gap between median house and unit values increased to record levels through the Covid upswing. With borrowing capacity being hit hard as interest rates rise, it’s likely more housing demand has been diverted towards more affordable sectors of the market," he said.

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Spring listings remain muted as demand holds firm

This year's spring selling season hasn't brought the surge of new listings typically expected as sellers remain broadly hesitant. 

There was a small uptick in new stock on the market through October, however new listings were -25 per cent down on the same month in 2022 and -19 per cent below the five-year average. 

New listings haven't kept up with the usual trajectory seen in the spring selling influx. Source: CoreLogic

"Although we are now seeing a late spring response to freshly advertised supply, every capital city except Darwin is recording a lower than average flow of new listings added to the market over the past four weeks," Mr Lawless said. 

"The low number of freshly advertised properties is probably helping to contain price falls to some extent. So far we haven’t seen any evidence of panicked selling or forced sales."

On the buyer front, the combined capitals saw home sales nudge +3.8 per cent higher than the five-year average for the quarter, showing demand has been generally resilient. 

"The number of home sales is well down from the highs of late last year, however, the fact that sales activity is still above the five-year average over the past three months reflects a base level of demand remains for housing," Mr Lawless said. 

He also noted that those buying and selling at the same time (ie. upsizers, downsizers and relocators) made up the bulk of the transactions, with activity from first home buyers and investors taking a smaller share. 

Gains from the recent boom still greatly outweigh recent falls

While there's no denying prices have fallen at significant rates in a number of markets, Mr Lawless assessed that "the housing downturn has remained orderly, at least in the context of the significant upswing in values."

Comparing trough-to-peak growth over the pandemic to this year's price corrections, it's clear there is still a way to fall before home values could return to pre-Covid levels. 

Gains from the recent boom still vastly overshadow the declines seen in most markets. Source: CoreLogic

Sydney has weathered the largest price falls from the city's January peak, though it was also the first market to begin its decline, and recent signs are showing that the downward trend has been easing. 

After the recent downward acceleration in Brisbane, media headlines have also been particularly negative about the Queensland capital, but any corrections need to be taken into the context of the city's staggering +42.7 per cent growth up to June. 

Out of the 86 sub-state regions in CoreLogic's SA4 list, only two areas are trending below pre-Covid levels. 

Both are parts of inner Melbourne, areas that are known to have an oversupply of high-density units. 

The vast majority of homeowners in Australia remain in a net positive position since March 2020, with 66 of the 86 SA4 regions still showing overall gains of more than +20 per cent. 

The regions are now closely following capital city markets

Regional markets enjoyed an extended boom period earlier in 2022, but all have since fallen into step with their capital city counterparts. 

The lengthy run of growth seen in the regions looks to be very much over. Source: CoreLogic

Regional SA managed to raise its price peak in October by the slimmest of margins, and WA dropped by just -0.1 per cent. The remaining states have all been trending downwards since mid-year. 

Regional declines have now caught up to the capital cities. Source: CoreLogic

It's again worth considering the context of the past few years. The combined regional markets saw explosive growth of +41.6 per cent over the course of the pandemic. By comparison, the -4.9 per cent dip since June is only a small portion of those gains. 

Speaking to the recent reaction to interest rate hikes, Dr Nicola Powell, Domain's Chief of Research and Economics, noted that "there is no market in Australia that isn’t impacted by the changes to borrowing capacity."2

She did, however, point out that regional markets have been more resilient than metropolitan markets in part due to the relative affordability of out-of-city areas.

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What comes next for Australian property?

November opened with a second consecutive +0.25 per cent increase to the cash rate. 

This represents a more restrained response from the RBA, although more rises are expected to come as the latest inflation figures have exceeded expected levels. 

Mr Lawless commented that, "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."

All four of Australia's big banks are forecasting property prices to decline by between -8 and -14 per cent in 2023, a larger downturn than experienced this year. 

The banks' predictions have a reputation for being overly conservative, though, and Mr Lawless pointed out there are several factors that will help mitigate further price falls. 

Increased immigration stoking demand, rising wages in a tight labour market, the potential for investors to return in an exceedingly tight rental market and bolstered household savings over the pandemic may all work to assist property values in the new year. 

Ultimately, the CoreLogic report describes current climate as a buyer's market, suggesting that vendors "will need to be realistic about price expectations and be ready to negotiate."

1 Research News, ‘CoreLogic Home Value Index: Six months of falls for Australia’s residential property market’, CoreLogic, 1 November 2022, https://www.corelogic.com.au/news-research/news/2022/corelogic-home-value-index-six-months-of-falls-for-australias-residential-property-market 

2 Sydney Morning Herald, 'NSW regional property prices fall for first time since early 2020', 28 October 2022, https://www.smh.com.au/property/news/nsw-regional-property-prices-fall-for-first-time-since-early-2020-20221027-p5btc8.html 

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