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September shows signs of the market downturn slowing

February 29, 2024
Andy Webb

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

It's been a turbulent year for the Australian property market, but there are early signs of the current downturn beginning to ease. 

CoreLogic's latest HVI report shows that home prices fell at a shallower rate than they did in August. Now slowing interest rate hikes could help continue to soften that descent as 2023 approaches. 

So what's in store for the months ahead? 

National housing prices: September 2022

The median Australian property price dropped -1.4 per cent in September according to CoreLogic data, easing back from the -1.6 decline seen in August. 

Australian home prices fell another -1.4% in September. Source: CoreLogic

As has been the case throughout 2022, Sydney led the market downturn with a correction of -1.8 per cent for the month. Melbourne's descent was more gentle at -1.1 per cent. 

The once-surging Brisbane also continued its rapid decline from its historic peak with a -1.7 per cent drop. Canberra and Hobart were close behind with -1.6 per cent and -1.4 per cent declines respectively. 

Meanwhile, Adelaide held surprisingly firm, holding off any significant fall with just a -0.2 per cent decrease for September. 

Perth was also relatively stable at -0.4 per cent, while Darwin prices didn't move at all. 

Looking to the regions, the rest-of-state areas stuck closely to their city counterparts. The overall drop for regional Australia was -1.3 per cent. 

Tim Lawless, CoreLogic's research director, explained that the easing decline suggests "​​It's possible we have seen the initial shock of a rapid rise in interest rates pass through the market and most borrowers and prospective home buyers have now ‘priced in’ further rate hikes."

He did note that any further fast-paced rate increases could see the downturn pick up speed again.

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Spring listings are below-average, helping to cushion the correction

At this time of year, we would usually be seeing a surge in new listings. Instead, 2022 has been marked by seller caution. 

Over the four weeks to September 25th, new listings in the capital cities were -12 per cent lower than the same period in 2021, with total available stock dropping to -15 per cent below the five-year average. 

New listings have taken an unseasonal dip through the beginning of spring. Source: CoreLogic

With these numbers in mind, Mr Lawless said that "It seems prospective vendors are prepared to wait out the housing downturn, rather than try to sell under more challenging market conditions."

"We haven’t seen any evidence of distressed sales or panicked selling through the downturn to date; in fact, it has been the opposite."

A more balanced market looks to be unfolding, as also evidenced by auction clearance rates that have regained some strength from a poor start to winter. 

Auction clearance rates have gradually risen from a low point around June. Source: CoreLogic

With listings edging lower at a time when the opposite would normally be true, sellers may see an upside as buyers find themselves with less choice than they would have expected for the spring selling season. 

Regional markets are more-or-less mirroring the capital cities

While the capital city markets began their decline earlier in 2022, regional locations looked to be holding strong and increasing their gains. That dynamic has now well and truly shifted, as both regional and metro markets fall into line with one another. 

Regional declines are now equalling the magnitude seen in capital cities. Source: CoreLogic

The difference between each state's regional and capital markets was within a few tenths of a per cent in September, with regional South Australia's outperformance of Adelaide by +0.7 per cent the main exception.

After a second wind going into 2022, the regions are now matching metro areas. Source: CoreLogic

There are still some locations clinging on to peak-level prices, especially "​​regional markets associated with agriculture, mining and tourism," Mr Lawless said. 

Others, meanwhile, have struggled due to ongoing flooding. The Richmond-Tweet region, which encompasses Byron Bay, is one such region that has struggled after a remarkable boom period. 

"These areas saw housing values rise between +38 and +62 per cent through the growth cycle, so most homeowners are still well ahead in terms of equity in their home," he noted. 

That historic growth experienced across many of Australia's regional markets means the downturn would need to extend far beyond its current point to wipe out the majority of the gains seen since the pandemic began. 

Units are outperforming houses in the market downshift

The 2021 property boom was very much house-led, so it shouldn't come as a shock that houses have been taking the biggest hit in this year's market decline. 

The combination of worsening affordability and interest rates cutting buyers' borrowing power have both pushed more interest towards units, which didn't climb to the same heights that houses did in the cycle's upswing. 

Over the Q3 period of 2022, the national median house price fell by -4.6 per cent against a -2.6 per cent correction for units. 

AMP Capital's chief economist Dr Shane Oliver told Domain that "​​people will scrimp and save and do what they must to get into a house, that’s why the rate of increase over long periods of time has been stronger for houses than units.

"Very low interest rates have enabled people to borrow more to get into their preferred property, which is a house. At the same time, there hasn’t been enough supply to meet population growth."

Economists still see houses as having a long-term advantage, but supply shortages are expected to further deteriorate as immigration increases and new residents favour units as either buyers or tenants.

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What comes next for Australian property?

After five straight months of hefty 0.5 per cent increases to the cash rate, the RBA started October with a more tentative 0.25 per cent bump, potentially signalling that the bulk of the rate hikes could be behind us. 

Private sector economists are, on average, forecasting the cash rate to reach a peak of 3.35 per cent early in 2023. With rates having risen from 0.1 per cent in April to 2.6 per cent in October, that would mean the majority of the movement is over as inflation looks to be passing through its peak. 

The CoreLogic report suggests that once rates do settle, property prices may do the same and find their bottom. Before then, it's expected that further declines, albeit shallower, are still to come. 

"We will be watching for any signs of market distress as the dual impact of higher interest rates and high inflation impact household budgets," Mr Lawless said.  

"To date, the flow of new ‘for sale’ listings has actually trended lower as vendors retreat to the sidelines, a good indicator that homeowners are weathering the downturn."

With spring listings falling below average and auction clearance rates on the up, a more balanced real estate environment looks to be unfolding. Sellers will still need to be realistic about prices and ready to negotiate, while buyers may find less on the market than they expected from the warmer months. 

Research News, ‘Home Value Index: Home Value Index shows rate of decline in housing values eases in September’, CoreLogic, 2 October 2022, https://www.corelogic.com.au/news-research/news/2022/home-value-index-shows-rate-of-decline-in-housing-values-eases-in-september

Domain News, 'House price growth has far surpassed apartments in recent years. Could the gap narrow?', 19 September 2022, https://www.domain.com.au/news/house-price-growth-has-far-surpassed-apartments-in-recent-years-could-the-gap-narrow-1168380/ 

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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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