Australia’s Property Market Shows Signs of Recovery Amidst Inflation and Supply Concerns

In what may be seen as a silver lining, new data reveals that Australia’s property market is beginning to recover despite concerns of high interest rates, rising rents, and a persistent lack of housing supply. This insight into the property market is evident in the May 2023 auction report from Domain, which noted an encouraging 17-month high in clearance rates across the country’s combined capital cities. However, the anticipated rise in interest rates and soaring rents present a looming threat, potentially steering the country into uncharted and dangerous territory.

The Domain auction report highlighted a rise in clearance rates – a key indicator of the property market – to a remarkable 71 per cent. It’s the highest point since October 2021, signifying a cautious but steady recovery of the housing market. Despite Canberra being the only capital not to have seen an annual increase in clearance rates, cities such as Sydney, Melbourne, and Adelaide achieved rates beyond 70 per cent. Sydney took the lead as the best-performing capital city with a clearance rate of 74.3 per cent, its highest since October 2021 (Johnson, 2023).

Dr Nicola Powell, Domain’s Chief of Research and Economics, cited these trends as a reflection of the “broader momentum that has built as Australia’s housing market begins to recover.” However, she also pointed to the persistently weak auction listings in Sydney and Melbourne, attributing it to the high interest rates, increasing prices and rents, and the lack of housing supply. These factors, she said, “shows that even though there are less homes going under the hammer, buyers are willing to place favourable auction offers when choice remains limited” (Johnson, 2023).

Yet, the underpinning concerns relating to the housing market extend beyond interest rates. A looming housing shortage is growing more prominent, spurred by an unexpected rise in population growth as immigrants return to the country post-pandemic. The influx of new arrivals, coupled with the insufficient rate of housing completions, puts significant pressure on the already strained housing market.

A report by News Desk echoed these concerns, highlighting that more than 1,000 people are entering Australia daily, far surpassing the country’s ability to complete the necessary 300 to 500 new residences per day (News Desk, 2023). This housing shortage is further exacerbated by rising rents, which are projected to surge 10 per cent this year, according to the Reserve Bank of Australia’s governor, Philip Lowe. This rise could potentially contribute to higher inflation numbers, leading to even more rate hikes (News Desk, 2023).

As Australia navigates these complex challenges in its housing market, it is evident that a more coordinated immigration policy, paired with strategic business and government investment, may be necessary to maintain living standards. Amidst the backdrop of these issues, the recent surge in clearance rates offers a glimmer of hope, signifying the beginning of a potential recovery for Australia’s housing market.

References:

Johnson, K. (2023, May). Key sign Australia’s housing market is beginning to recover. https://www.nine.com.au/property/news/sign-australian-housing-market-is-beginning-to-recover-auction-clearance-rates/d03161c3-bf8b-4e5e-b846-82ba1133d22c 

News Desk. (2023, June). Property Market Rebound: Heading into Uncharted and Dangerous Territory? https://www.globalvillagespace.com/australia/property-market-rebound-heading-into-uncharted-and-dangerous-territory/