Australia’s Property Market Shows Signs of Recovery as Property Prices Rise for Second Consecutive Month

Australia’s property market may be back on track, as home values have increased for two consecutive months, according to a CoreLogic report released Monday. The national Home Value Index rose by 0.5% in April, following a 0.6% increase in March, recovering from a “relatively short but sharp downturn” (Catapano, 2023). CoreLogic’s research director Tim Lawless said, “Not only are we seeing housing values stabilizing or rising across most areas of the country, a number of other indicators are confirming the positive shift” (Catapano, 2023).

Home values had been in negative territory for more than a year, falling 9.1% between May 2022 and February 2023 (Reuters, 2023). However, in April, Sydney led the way with a 1.3% increase in prices, while Melbourne experienced a 0.1% uptick (Reuters, 2023). Two factors are believed to be reviving prices in the overall market: the return of overseas buyers and lack of supply, particularly of rentals. Lawless stated, “The key drivers of this positive inflection seem to be the larger than expected rise in net overseas migration, which has created additional housing demand at a time of extremely tight rental conditions and well-below-average levels of advertised supply” (Catapano, 2023).

As interest rates stabilize, consumer sentiment is expected to improve, further bolstering housing market activity from both purchasing and selling perspectives (Catapano, 2023). The Reserve Bank of Australia (RBA) is predicted to maintain the current interest rate of 3.6% for May (Reuters, 2023). Gareth Aird, head of Australian Economics at Commonwealth Bank of Australia, noted that the headwind on property prices from interest rates ratcheting higher had mostly run its course, adding, “We no longer expect our long held forecast for a national decline in home prices from peak to trough of about 15% to come to fruition. We now expect home prices to rise by 3% in 2023 and forecast a further increase of 5% in 2024” (Reuters, 2023).

Shane Oliver, chief economist at AMP, also revised his expectations, no longer anticipating a 15-20% top-to-bottom fall in housing prices. Instead, he cited “a far worse property demand and supply imbalance” with immigration levels surging and supply remaining tight, now forecasting prices to be up slightly this year (Reuters, 2023).

References:

Catapano, P. (2023). Australia’s Housing Market Is Finally on the Rebound. Retrieved from https://www.mansionglobal.com/articles/australias-housing-market-is-finally-on-the-rebound-1f7a21a6#:~:text=Home%20values%20had%20been%20in,rise%20over%20the%20previous%20quarter 

Reuters. (2023). Australia’s home prices rise again in sign of market bottom. Retrieved from https://www.reuters.com/markets/australias-home-prices-rise-again-sign-market-bottom-2023-05-01/